How to Buy, Hold, and Sell in Your Cryptocurrency IRA

If you have decided to start a cryptocurrency IRA, then you also need to find out how you will purchase your cryptocurrencies using your retirement funds.You have the option of opening a solo 401(k), but the majority of people find that a self directed IRA, and particularly the Roth IRA, is the best option for those who wish to invest in cryptocurrencies.

How to Fund Your Self-Directed Cryptocurrency IRA

Cryptocurrencies are highly volatile and you must be aware of that before you decide to use them in your retirement plan. It is quite common for custodians of a self directed IRA to the mound that you register yourself as an LLC in order to hold cryptocurrency. Essentially, the LLC will be  the owner of the IRA as well as being the vehicle through which cryptocurrencies are purchased.

 Funding your self directed cryptocurrency IRA is a 9 step approach:

  1.  Find an IRA custodian and set up your self directed IRA account.
  2.  Roll over any tax free cash, cash and kind, or retirement funds you already have into the self directed IRA.
  3.  Have your IRA assets transferred to the LLC, which is tax free, and receive 100% of the interest in the IRA LLC.
  4.  Become the manager of the LLC and open a bank account for it in any local bank.
  5.  Obtain checkbook control over the funds and assets within the IRA LLC, which will allow you to make the investments in cryptocurrency.
  6.  Open a cryptocurrency account using the same name as the IRA LLC.
  7.  Wire over the fence from your IRA LLC to your new cryptocurrency account, which should be held with an established crypto exchange of your choosing. Remember that's the account name must match that of your IRA LLC.
  8. Hold your crypto currencies in your offline or online wallet or keep them within the exchange.
  9.  Because 100% of the LLC is owned by the IRA, it will appear as a disregarded entity for taxation purposes. This means that you do not have to file a federal income tax return although you may need to file a franchise tax on your LLC depending on your state. Any income that is earned through the Investment has to go back into the IRA and then you don't have to pay tax over it.

As you can see, the process is neither easy nor so complicated that it is impossible to do. However, it is recommended that you speak with a personal tax advisor and a financial advisor so that you don't make any mistakes along the way. Once it is all set up however, you will find that it is very easy to manage and all you're really have to do is work with your custodian to make your investment grow as much as possible. Do also remember that it is never a good idea to invest 100% of your portfolio in just one single thing. Hence, diversify by looking at multiple types of cryptocurrency but also at other forms of investment.


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