Are you starting to suffer from the fear of missing out? It’s hard not to when new cryptocurrency investors become millionaires every day. And new cryptocurrencies spring up all the time. Intuitive investors are investing small amounts into these cryptos and making big money at the same time.
For those of you who are new to the game, I’d like to share some insight today. I’ll tell you about crypto investing for beginners and my personal favorite way of buying Bitcoin and other currencies. Without totally spoiling things, I’d like to mention that I’m definitely partial to opening a cryptocurrency IRA.
Why choose this investment strategy?
Personally, I want to make the most of the limited resources I have. And one of the biggest benefits of opening a Bitcoin IRA is the tremendous tax advantages.
I’ll go into greater detail about the tax benefits below. But for now, know that this part of the strategy is totally worthwhile.
Let’s dive in and get to the heart of the matter from the very beginning.
The Definition of a Cryptocurrency
A cryptocurrency, also known as a crypto, is a form of digital currency. This digital currency can be used as a way to pay for goods and services on the Internet.
Even more important, cryptocurrencies are completely decentralized. What does this mean? It means that it isn’t controlled by a government or central authority.
And this is incredibly important. It’s critical because governments tend to interfere with and manipulate their currency. Take the stimulus payments as an example. These payments added trillions of dollars of debt to the overall US bottom line.
Why does that matter?
It matters because they flooded the market with more currency, which in turn devalued the US dollar. It’s a big part of the reason why we’re experiencing inflation right now.
Just know that cryptocurrencies are typically immune to interference or manipulation by centralized governments, which is definitely a good thing.
What Is Blockchain?
This is how transaction records are maintained for cryptocurrencies. It’s part of a system that has peer-to-peer network computers linked and recording each of the transactions made across the network.
What is a Cryptocurrency Key?
When you purchase cryptocurrencies like Bitcoin or Ethereum, you become the recipient of two keys. The first of these keys is an identifier known as a public key, which is very similar to your bank account number. The second of these keys is known as a private key, which is needed to unlock using your cryptocurrency. This key is very similar to your bank password online.
What is a Cryptocurrency Wallet?
A cryptocurrency wallet is a place to keep all of your private keys accessible, safe, and secure. Within this wallet, you can receive new crypto, send crypto to someone else, and spend this digital currency as well.
Three cryptocurrency wallet types exist today. They include the following options:
- Hardware wallet – in this particular case, you will keep all of your keys stored safely on an existing thumb drive.
- Online wallet – with this type of wallet, you keep your private cryptocurrency safely stored on an app or a different piece of software online.
- Paper wallet – some people prefer to keep their keys stored safely and written down on a piece of paper.
The most accessible choice for crypto key storage is to use an online wallet. It simplifies the entire process and makes it easy to receive, use, or send crypto.
Also, cryptocurrency IRA account holders are required to maintain an online wallet.
Speaking of a Bitcoin IRA…
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The Biggest Cryptocurrency IRA Benefits
As you are undoubtedly aware, there are many benefits to opening a cryptocurrency IRA. And if you weren’t aware, this is an excellent crypto investing for beginners strategy to consider.
Some big benefits include:
This may have never hit your radar before, but a Bitcoin IRA acts as a tax shelter in a way. You can make trades within this account and earn massive amounts of income. The returns within this account are protected from taxable events.
Now, depending on how you’ve set up your account, you’ll either fund it with post-tax dollars. Or you’ll pay taxes when you take distributions. I’ll go into greater detail about this right now.
Experience Growth in a Tax-Advantaged Account
When you make an investment within a Bitcoin IRA, you have the option to choose a self-directed traditional IRA or Roth IRA.
You might be wondering, “What’s the difference between a traditional self-directed or Roth self-directed IRA?”
To put it simply, each of these strategies comes with specific tax advantages. As an example, if you were to open a Roth self-directed IRA, you have the option to experience tax-free growth.
Simply put, you’ll fund this account using income that was already taxed in the past. So, after you deposit these funds and begin investing them, all of your gains are considered tax-free gains.
That’s one of the biggest benefits of opening a Roth self-directed IRA with cryptocurrency investment capabilities.
What about a traditional self-directed IRA?
Similarly, this account is funded with income that was not taxed previously. This is an added tax benefit because it lowers your annual gross income at tax time.
When you use these funds to buy cryptocurrencies, you’ll eventually pay taxes on this income. But only when you take a distribution.
Distributions cannot be taken in a cryptocurrency IRA account until you reach 59 ½ years old. If you were to take a distribution earlier, you’d pay a 10% penalty. And you’d have to pay taxes on the income as well.
Tax Reporting Is Much Easier with a Cryptocurrency IRA
This next benefit is another wonderful opportunity that you get with a self-directed IRA. They make tax reporting so simple that it doesn’t seem like a chore at all.
As mentioned above, you can start withdrawing from your self-directed traditional or Roth IRA account at 59 ½ years old.
In your traditional account, you must pay taxes on the withdrawn income on your yearly tax return.
The rule is to keep your Roth IRA account open for five years or more to receive the major benefit. By following this rule, you aren’t required to ever pay income tax or capital gains tax on your earnings.
Another cool thing is you don’t have to report crypto transactions on your yearly tax returns. This is another great perk of cryptocurrency IRA investing. Just mention the contributions and distributions to your accountant and that’s all you’ll report on your year-end taxes.
Diversifying my portfolio is one of my all-time favorite things about cryptocurrency IRA investing. I love investing in as many markets and strategies as possible. And adding crypto to a retirement portfolio is a phenomenal way to bolster your assets.
Most people invest in and stocks and bonds and other traditional assets. Others like to invest in real estate, private placements, and precious metals as alternative assets. And there’s absolutely nothing wrong with any of these investing strategies. They will make tremendous returns over the long term.
But IRA investors are taking it a step further these days. They are adding even greater levels of diversity to their portfolio by investing in a Bitcoin IRA. Not only does it add a different asset class to your portfolio. It also provides a lucrative opportunity to make a tremendous amount of money very quickly.
This kind of money-making opportunity doesn’t come along every day. Cryptocurrency investors are becoming millionaires overnight and billionaires in some cases.
I read about a guy who purchased $8000 worth of Shiba Inu when it was first released. His portfolio is currently worth $5.7 billion! And yes, I said billion with a capital B.
Get started by reading my best cryptocurrency companies review today.
Things to Keep in Mind about Cryptocurrency IRA Investing
Sometimes investors fail to truly think about their strategy before they get involved. This definitely happens with Bitcoin IRA investors from time to time. Before you jump in, I’d like you to consider the following things to keep in mind. They include:
- Extreme Volatility – cryptocurrencies are extremely volatile investments. They have wild price swings throughout the day. You have to ignore the volatile price movement and invest for the long term. Otherwise, you may scare yourself out of an investment as soon as it decreases by 10% or more. This is likely premature thinking. Because as we’ve seen, Bitcoin is reaching all-time highs once again and it has doubled in value recently.
- Long-Term Investing – investing in a Bitcoin IRA is a long-term strategy. You cannot touch the money in this account until you turn 59 ½ years old. If you take it out earlier, you’ll have to pay taxes and a 10% early withdrawal penalty.
By now, you undoubtedly know if cryptocurrency IRA investing is the right choice for your personal situation. If you see the incredible value in this investment the same way I do, you should jump at the opportunity.
Are you ready to get started? Do yourself a favor and read my review of the best cryptocurrency IRA companies in business right now. This insightful information will help you choose the perfect company to meet your financial needs.