How to Buy Ethereum With an IRA

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Contributor, Benzinga
September 30, 2022

Want to jump straight to how to buy Ethereum with an IRA? Bitcoin IRA is one of the best crypto IRA platforms that supports Ethereum.

A large portion of the working-age population in the United States has some form of retirement savings. Some are created through an employer, such as a 401(k), while others are up to the discretion of the individual, such as Individual Retirement Arrangements (IRA). IRAs have significant tax benefits and allow for more agency when choosing investments. Traditional IRA deposits are not taxed until they are withdrawn and when they are withdrawn, they are taxed as current income. Because most retirees have a lower income, they will probably be in a lower tax bracket than they were in their year of earning.

Additionally, 401(k)s and other employer-sponsored plans often only allow employees to choose from a select handful of investments, while IRAs have a huge variety of assets to choose from. However, until recently it was not possible to buy cryptocurrency with an IRA. Now, platforms like Bitcoin IRA make it a breeze. You can buy Bitcoin, Ethereum (ETH) and a wide selection of altcoins with Bitcoin IRA. 

How to Buy Ethereum With an IRA TLDR

To buy Ethereum with an IRA, head over to a crypto IRA platform like Bitcoin IRA, create a free account in minutes, and then fund your account within the annual limits set by the IRS. Then you can begin trading within three to five business days using Bitcoin IRA’s up-to-date trading feature. 

How Does a Crypto IRA Work?

A crypto IRA is virtually the same as a standard IRA. The only difference is that a crypto IRA has cryptocurrency invested, while a regular IRA does not. The IRS also sees the two as virtually the same and taxes both equally.

In a standard IRA, you can buy and sell assets, such as stocks and bonds. Profitable trades are not taxed in the year they are earned, but withdrawals can be taxed as a form of income. The IRS sets limits for the amounts individuals can contribute to Traditional and Roth IRAs. The annual contribution limit for 2022 is $6,000, or $7,000 if you're age 50 or older. Your Roth IRA contributions may also be limited based on your filing status and income. 

These principles can also be applied to crypto IRAs. Bitcoin IRA offers Traditional IRAs and Roth IRAs that operate similarly to the standard IRAs. 

Pros of Buying Ethereum With an IRA

The three main pros of buying Ethereum with an IRA are diversification, tax benefits and potential for growth.

Crypto can be vastly different from the traditional assets you can purchase with an IRA. Because of this, it can allow investors to diversify their portfolios and hedge against some risks.

As stated earlier, IRAs also have tax benefits. Depending on the type of IRA, you can either avoid paying capital gains taxes and pay income tax on withdrawals (Traditional IRA) or contribute after-tax dollars and avoid taxation on gains you make on your investments (Roth IRA). 

Crypto allows investors to be exposed to high potential for growth. Many cryptocurrencies have exploded in price. While there is no guarantee that this will happen again, it could be a good option for those who can tolerate the risk.

Cons of Buying Ethereum With an IRA

The three main cons of buying Ethereum with an IRA are volatility, fees and risk.

Crypto is more volatile than traditional assets. If you are nearing retirement and do not have the time to stomach volatility, then a large downswing could cost you a portion of your savings. 

Crypto IRAs also involve more fees than standard IRAs. These fees can include setup fees, custodial fees, trading fees and management fees. Some of these fees do not appear in standard IRAs and are more unique to crypto IRAs.

Finally, cryptocurrency involves risk. As seen in 2022, some crypto assets can be worth nothing overnight. Additionally, if the price of a token falls, there is no guarantee that the price will ever go back up to its original levels. 

What to Look for in Crypto IRA Platforms

The best features to look for when choosing a crypto IRA are the fees, security, reputation and number of products available for investors. If a crypto IRA broker looks good in all these areas, then it may be worth using that platform. 

How to Buy Ethereum With an IRA:

To buy Ethereum with an IRA, there are a few steps to take.

First, create an account on a crypto IRA platform. Bitcoin IRA and Bit IRA are two of the best that offer Ethereum. You can create a free account in minutes, but it may take a few days for the platform to finish opening and verifying your account. Once you set up, fund and verify the account, you are ready to begin trading. 

With your funded account, use the trade feature and search for Ethereum. Once you have found Ethereum, enter the amount you would like to purchase and execute the trade. From there, your Ethereum will be stored in your portfolio.

To sell or swap your ETH, head back to the trading feature. You can then select your ETH and choose whether to sell it for fiat currency or swap it for another cryptocurrency. Feel free to do this as many times as you would like as the trades are tax-free. However, they may be subject to trading fees. 

Risks of Buying Ethereum With an IRA

The main risk of buying Ethereum with an IRA is that the price will depreciate and not recover before you need the funds. No one can guarantee that the price of ETH will go up on any time horizon. As such, it is important to take into account the amount of risk associated with investing in Ethereum before making a decision. Historically, the crypto market has recovered from its devastating crashes, but sometimes it takes years and there is no guarantee that it will come back.

Crypto IRA platforms could be hacked or go bankrupt and cause you to lose your investment. For this reason, it is important to identify the best crypto IRA platforms that value their customers’ security like Bitcoin IRA. 

Is Buying Ethereum With an IRA Worth it?

If you think Ethereum will perform better than traditional investments long term, then buying Ethereum with an IRA may be worth it. However, it is also worth considering whether the fees on crypto IRA platforms compared to regular crypto trading platforms are worth the tax-deferred status for you. Overall a decision to buy Ethereum with an IRA comes down to your views on Ethereum and the overall crypto and worldwide market outlooks. 

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About Caden Pok

Caden has been involved with cryptocurrency for several years, began trading and investing in crypto in 2018 and is highly experienced with DeFi technology. He took part in undergraduate research studying cryptoeconomics and is a member of Wolverine Blockchain, a group designed to educate students on cryptocurrencies and blockchain technology. Currently, he mines multiple coins and holds positions in Cardano and Ethereum.