How to Use Crypto Investments to Save for Retirement

Many people know that investing in cryptocurrency can be a way to build wealth and start increasing their potential future income. However, not as many people think about the benefits of investing in cryptocurrency in order to save for retirement.  

This guide goes over different ways that individuals can invest in cryptocurrencies in order to save for retirement. It also discusses the benefits of doing so and why it can be a great way to bolster your retirement savings.  

How Building Retirement Portfolios With Crypto Works 

If you want to get started building a retirement account using crypto investments and digital assets, the first step is to find an IRA custodian who will allow you to purchase these investments.  Please note that these custodians that allow the purchase and sale of cryptos will usually charge some annual fees that a custodian who only holds stocks bonds and mutual funds will not. 

IRAs That Allow Crypto Purchases 

Although it sounds easy enough to add crypto to your retirement portfolio, not all IRAs actually allow you to do so. As a result, you’ll need to make sure that you find one that does if you plan to use crypto investing as part of your retirement strategy.  

These types of IRAs are actually just self-directed IRAs, which means that you are in charge of what enters and exits your account. A couple of the more popular crypto IRAs out there include:  

  • Bitcoin IRA 
  • CoinIRA 
  • BitIRA 

Remember, when choosing a cryptocurrency IRA you need to make sure to check reviews and research sites like Trustpilot. With the rising popularity of crypto purchases, a number of scammers have begun setting up fraudulent self-directed IRAs, which can leave retirees penniless.  

Doing your due diligence can help you to avoid these types of scams and select an IRA that can offer a potentially strong return on your investment.  

Purchasing Cryptocurrency for Your IRA 

Once you’ve selected which IRA you’ll use to make crypto investments, it’s time to actually add those investments into your account.  

The easiest way to do so is to use , checks, direct deposits, or transfers from another IRA to invest in your account. Remember, there are annual limits which, for 2023, is $6,500 ($7,500 if you’re over 50). 

Additionally, if you have a plan through an employer, you may be able to do an “in service distribution” and roll out some funds to an IRA, and can then start adding crypto , which lets you enjoy a tax-deferred status on any funds currently in your account. Or, you can simply move all of your funds into an IRA that allows crypto purchases, if you leave the job and are eligible to rollover the funds in the company plan.  

Once you’ve moved your cash into a crypto-compatible IRA account, you can start using the funds within your retirement account to trade for cryptocurrencies. Just remember that you’ll still have to pay fees for transactions as well as for your IRA, which can quickly add up.  

Benefits of Purchasing Cryptocurrency for Retirement 

There are a couple of potential benefits of purchasing crypto for retirement. For one thing, cryptocurrency has the ability to rise dramatically in the coming years. Bitcoin, Litecoin, Ethereum and others have seen enormous success over the past several years, despite the more recent weakness seen in the past 12-15 months or so.  

While cryptocurrencies must still be considered speculative, or “aggressive growth” holdings for most people, these types of investments can offer high returns that could help bolster your future retirement income.   

Also, cryptocurrency purchased and held in IRAs can provide the typical tax benefits that IRAs offer with more traditional investments. Some retirees may be able to lower their tax liability by avoiding capital gains taxes on these types of investments for many many years.  

Despite the benefits of purchasing crypto for your retirement account, you should be aware of the risks.  

A few of the most common risks include:  

  • Insurance: The FDIC does not insure cryptocurrency in the event that something goes awry. 
  • Market: The crypto market is highly volatile and experiences regular fluctuations that can lead to great financial losses. 
  • Fraud: There may be a fraudulent crypto exchange, so retirees need to be cautious when looking for crypto IRAs.  

Final Thoughts 

Cryptocurrency is one of many investments that individuals can use in order to save for retirement. At this stage, it should only be a small percentage of anyone’s retirement portfolios, due to its risk levels, but of course along with those higher risk levels comes the opportunity for abnormally large gains. Just remember that purchasing cryptocurrency through a retirement plan must be done under specific conditions and is only allowed with specific types of retirement accounts.  

Additionally, it’s important to weigh the tax benefits and potential returns against risks of fraud and fluctuating market conditions. That way, you can determine whether this is a smart investment choice that makes sense for you.  

Published by Robert Ryerson

A financial professional with more than three decades of experience, Robert Ryerson works closely with clients in the Freehold, New Jersey, area to meet their financial planning needs. As a Certified Financial Planner (CFP) at New Century Planning, he focuses on retirement income planning, as well as estate administration, regularly assisting his clients with legacy and estate planning. He also advises them on health and disability insurance, including Medicare, Medicaid, and Medicare Supplement Plans. Mr. Ryerson’s many years helping his clients navigate the complexities of retirement planning gave him a deeper understanding of the healthcare costs that retirees face. In 2013, he drew upon this knowledge to co-author the book What You Don’t Know About Retirement Will Hurt You. Outside of his work at New Century Planning, Robert M. Ryerson is a regular fixture at workshops and seminars on retirement. He has delivered several keynote speeches on the often-confusing topic of required minimum distributions. Mr. Ryerson continues to share his financial expertise as a facilitator of online courses for Certified Public Accountants through The Society for Financial Awareness. In the early 2010s, Mr. Ryerson became concerned about the threat of identity theft after noting the many cybersecurity breaches suffered by major companies. He became a Certified Identity Theft Risk Management Specialist (CITRMS) in 2014. He has since taught identity theft recovery courses at local community colleges. Mr. Ryerson also wrote a book on the topic entitled What’s the Deal with Identity Theft: A Plain English Look at Our Fastest Growing Crime. A graduate of Rutgers University with a degree in economics, Mr. Ryerson began his career in the financial services industry as a stockbroker. He obtained his CFP designation in 1991 and began working as an independent financial planner a few years later. In addition, he is a notary public.

%d bloggers like this: