Crypto IRAs: How To Invest in Crypto via Your Retirement Accounts

Stocks, ETFs, Bonds, etc., have long been staples of traditional retirement portfolios. However, as digital assets like Bitcoin and Ethereum become more mainstream, investors are starting to rethink what long-term growth looks like. 

Crypto IRAs are now emerging as a strategic option for those who want to align their retirement savings with the future of finance.

By using self-directed IRAs that support cryptocurrency, individuals can take advantage of tax benefits while accessing a high-growth asset class. This blog explores how to invest in crypto via your retirement accounts, breaking down the benefits, risks, and steps required to get started.

If you plan to build wealth with purpose, understanding the mechanics of Crypto IRAs could be a valuable part of your retirement strategy.

Key Takeaways

• Self-directed IRAs are required to invest in cryptocurrencies through retirement accounts.

• Choosing a specialized custodian like BitcoinIRA or iTrustCapital is essential for a crypto IRA setup.

• Traditional and Roth crypto IRAs offer different tax benefits, impacting contributions and withdrawals.

• Crypto IRAs allow tax-deferred or tax-free growth while avoiding capital gains taxes on trades.

• Key risks include volatility, regulatory uncertainty, higher fees, and the importance of IRS compliance.

What Is a Crypto IRA?

Source: Ideogram

A Crypto IRA is a self-directed individual retirement account that allows you to invest in cryptocurrencies like Bitcoin, Ethereum, and other digital assets. 

Unlike traditional IRAs, which typically include stocks, bonds, or mutual funds, Crypto IRAs allow account holders to hold crypto within a tax-advantaged retirement structure—either Traditional (tax-deferred) or Roth (tax-free withdrawals). 

These accounts are managed through custodians or platforms specifically equipped to support digital assets while complying with IRS regulations.

Cryptocurrencies are increasingly being considered for retirement planning because of their long-term growth potential and low correlation with traditional assets. As inflation concerns grow and interest in decentralized finance expands, many investors view crypto as a hedge against currency devaluation and market uncertainty. Including crypto in a retirement portfolio can provide greater diversification and the possibility of higher returns over time, especially for those with a long investment horizon.

Difference Between Traditional IRAs and Crypto IRAs

Traditional IRAs and Crypto IRAs serve the same primary purpose: helping individuals save for retirement in a tax-advantaged way. However, they differ significantly in the types of assets they support, the level of control they offer, and how they are managed.

A Traditional IRA typically invests in conventional assets such as stocks, bonds, ETFs, or mutual funds. Financial institutions manage these accounts, and the choices of assets are limited. Contributions are often tax-deductible, and withdrawals in retirement are taxed as ordinary income.

On the other hand, a Crypto IRA is a self-directed IRA that allows you to invest in cryptocurrencies. It provides more control over your portfolio but requires a specialized custodian. 

While the tax treatment (Traditional or Roth) remains the same, Crypto IRAs allow access to digital assets and offer a modern approach to long-term investing.

Types of Retirement Accounts That Allow Crypto Investments

Investors looking to add cryptocurrencies to their retirement strategy can do so through self-directed retirement accounts. 

These accounts are structured similarly to traditional IRAs but offer broader investment flexibility—including digital assets like Bitcoin, Ethereum, and other approved cryptocurrencies. 

Below are the main types of retirement accounts that support crypto investments:

Self-Directed Traditional IRA

A Self-Directed Traditional IRA (SDIRA) allows individuals to invest pre-tax income into a retirement account. Contributions may be tax-deductible depending on your income level and participation in employer-sponsored plans. Taxes are deferred until withdrawals begin, typically after age 59½.

With an SDIRA, you can include alternative assets like:

• Cryptocurrencies
• Real estate
• Precious metals
• Private equity.

Self-Directed Roth IRA

A Self-Directed Roth IRA also supports cryptocurrency but has a different tax structure. Contributions are made with after-tax dollars, and qualified withdrawals, including any gains, are tax-free in retirement.

This is particularly attractive for long-term crypto holders who believe in the significant future growth of digital assets.

For example, suppose you buy $6,000 worth of Bitcoin in your Roth IRA, which grows to $60,000 by retirement. You owe zero taxes on the $54,000 gain if the withdrawal is qualified.

SEP IRA (Simplified Employee Pension IRA)

A SEP IRA is designed for self-employed individuals or small business owners. Like Traditional IRAs, SEP IRAs are tax-deferred and allow for more significant contributions—up to 25% of compensation or $70,000 in 2025, whichever is less.

While SEP IRAs traditionally include mutual funds or stocks, a self-directed SEP IRA allows crypto investment when managed through an approved custodian.

This account type is ideal for freelancers, consultants, and small business owners who want to maximize tax-deferred savings and diversify into crypto.

SIMPLE IRA (Savings Incentive Match Plan for Employees)

Small businesses typically use a SIMPLE IRA with 100 or fewer employees. While SIMPLE IRAs don’t typically allow direct crypto investments, a self-directed SIMPLE IRA can be structured to enable alternative assets, including cryptocurrencies, with the help of a specialized custodian.

Though SIMPLE IRAs are less common than Traditional or Roth Crypto IRAs, they offer another route to crypto exposure for eligible small business employees.

Steps on How to Invest in Crypto via Your Retirement Account

The key to investing in crypto through your retirement account is choosing the right type of retirement account—typically a self-directed IRA that allows cryptocurrency investments. 

Below is a detailed, step-by-step guide with real-world examples and practical tips for each phase.

Step 1: Choose a Self-Directed IRA Custodian That Supports Crypto

The first and most crucial step is selecting a custodian that offers self-directed IRAs with cryptocurrency options. 

Traditional brokerage firms like Vanguard or Fidelity typically don’t allow crypto investments in retirement accounts. Instead, you’ll need to work with specialized custodians.

Top examples include:

• iTrustCapital: Supports low fees for assets like Bitcoin, Ethereum, and Chainlink.

• BitcoinIRA: One of the first platforms to offer crypto retirement accounts, providing access to a range of digital assets, integrated insurance, and secure digital wallets.

• Alto CryptoIRA: Offers a user-friendly platform with access to 250+ cryptocurrencies via Coinbase integration.

• BitIRA: Known for strict security protocols and cold storage custody.

Step 2: Open a Self-Directed IRA (Traditional or Roth)

Once you’ve chosen a custodian, the next step is opening the account. You’ll typically choose between:

• Traditional Self-Directed IRA: Contributions may be tax-deductible, and taxes are paid at withdrawal.

• Roth Self-Directed IRA: Contributions are made post-tax, but withdrawals (including gains) are tax-free if qualified.

Most custodians have online account setup processes that take less than 30 minutes to complete.

Step 3: Fund the IRA (via Rollover, Transfer, or New Contribution)

You can fund your crypto IRA in three primary ways:

• Rollover: Move funds from an existing 401(k), 403(b), or pension plan into the new IRA.

• Transfer: Move funds from another IRA account (e.g., Traditional or Roth) into the self-directed IRA.

• Direct Contribution: Contribute new funds (subject to annual limits set by the IRS).

The 2025 contribution limits include:

• Traditional and Roth IRAs: Up to $7,000 annually (or $8,000 if you’re 50 or older).

• SEP IRA: Up to 25% of compensation or $70,000  (may adjust annually).

Step 4: Select and Purchase Cryptocurrencies

Once funded, you can start investing. Your custodian will provide access to a list of supported cryptocurrencies, often through a trading dashboard or integration with a third-party exchange.

Common cryptocurrencies available include:

• Bitcoin (BTC)
• Ethereum (ETH)
• Solana (SOL)
• Chainlink (LINK)
• Litecoin (LTC)

For example, you may allocate 60% to Bitcoin, 30% to Ethereum, and 10% to Solana to balance between established and emerging crypto assets. Most custodians allow you to rebalance over time as your investment goals evolve. Be mindful of transaction fees and minimum order sizes, which vary by custodian.

Step 5: Secure and Manage Your Crypto IRA Portfolio

Security is a top concern when dealing with digital assets. According to Chainalysis, over $3.8 billion in crypto was stolen in 2022, mostly from hot wallets. Using an IRA custodian with insured cold storage can significantly reduce exposure to such risks.

Reputable custodians store crypto assets in cold storage, protected by multi-signature protocols and insured against theft or breach.

Management features often include:

• Real-time portfolio tracking
• Rebalancing tools
• Performance reports
• Tax documentation

Benefits of Investing in Crypto Through an IRA

Source: Freepik

Here are the key benefits of investing in crypto through an IRA:

Tax Advantages

One of the most significant incentives for using a crypto IRA is the favorable tax treatment it offers.

• Traditional Crypto IRAs allow tax-deferred growth. You pay taxes only when you begin withdrawals in retirement.

• Roth Crypto IRAs allow for tax-free growth and withdrawals, assuming the account is held for at least five years and you’re over 59½.

Protection Against Inflation & Economic Uncertainty

Cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) are often called “digital gold” due to their scarcity and decentralized nature. Bitcoin’s fixed cap of 21 million coins makes it deflationary by design.

As inflation rose globally during 2021–2023, many investors turned to Bitcoin to preserve their purchasing power. U.S. inflation peaked at 9.1% in mid-2022, the highest in 40 years. During that time, interest in crypto IRAs surged, with platforms like Bitcoin IRA reporting record sign-ups as users sought alternative stores of value.

Another great example was in 2024, when Gold rose by just 26%, while Bitcoin surged by 150%, proving crypto’s stronger hedge against inflation.

While it’s not a guaranteed inflation hedge, Bitcoin has shown strong performance in periods of monetary expansion. Holding crypto in an IRA preserves purchasing power while benefiting from long-term price appreciation.

Institutional Adoption & Regulatory Clarity

The SEC’s approval of Bitcoin ETFs in 2024 (BlackRock, Fidelity) marked a turning point for crypto as a legitimate retirement asset.

Key developments include:

• Bitcoin ETFs in US surge with $2 Billion Inflows.
• Major IRA providers (e.g., iTrustCapital, Bitcoin IRA) now offer crypto IRAs with institutional-grade custody.
• The U.S. government clarified crypto tax rules (2024), reducing uncertainty for retirement investors.

This growing institutional trust makes a Crypto IRA safer than ever.

Portfolio Diversification Beyond Traditional Assets

Traditional IRAs are often limited to stocks, bonds, and mutual funds. A Crypto IRA provides access to non-correlated assets that don’t always move in sync with the stock market.

This can help hedge against traditional market downturns. For example, during the COVID-19 crash in March 2020, the S&P 500 fell over 34%, while Bitcoin initially dropped—but recovered faster, gaining over 300% by the end of the year.

Adding crypto to your retirement account creates a broader, more resilient portfolio.

Long-Term Investment Horizon Aligns with Crypto Volatility

IRAs are designed for long-term investing, which aligns well with the crypto market’s short-term volatility but long-term growth trends.

Holding crypto in an IRA encourages holding through market cycles rather than reacting to short-term price swings, which is an advantage for disciplined investors.

Institutional-Level Security and Custody

Investing through a Crypto IRA custodian ensures that your assets are held securely. Many custodians provide cold storage, multi-signature protection, and insurance coverage.

For example:

• BitIRA offers end-to-end insurance coverage for assets stored in cold wallets.

• iTrustCapital and BitcoinIRA partner with regulated custodians like Coinbase Custody and BitGo, ensuring robust compliance and security.

This level of protection is significant for retirement savings, which are meant to be preserved over decades.

Risks and Considerations of Crypto IRAs

Source: Freepik

While Crypto IRAs offer exciting opportunities for tax-advantaged growth and diversification, they also carry risks that investors must consider carefully before committing retirement funds to digital assets.

Here are the risks and considerations associated with Crypto IRAs:

High Volatility and Market Risk

Cryptocurrency prices can fluctuate dramatically and quickly, exposing your retirement savings to potential steep losses.

For example, Bitcoin fell from over $68,000 in November 2021 to under $17,000 by November 2022, representing a drop of more than 75% in just one year. Although it rebounded to above $70,000 by early 2024, such price swings can significantly impact your portfolio—especially if you’re approaching retirement and need stability.

Unlike traditional markets, crypto volatility is amplified by speculative trading, global regulatory shifts, and market sentiment.

Security Risks

Although most Crypto IRA custodians offer institutional-level security, crypto assets remain a target for cyberattacks. While your retirement crypto is typically stored in cold wallets (offline), no system is entirely immune from breaches or fraud.

Even regulated platforms have faced issues, like the 2022 hack of Crypto.com, which stole over $30 million. Though losses were reimbursed, this highlights the importance of custodial security. To minimize exposure, choosing a provider with insured cold storage (e.g., BitIRA, iTrustCapital) is essential.

Regulatory Uncertainty

The legal framework for cryptocurrency in retirement accounts is still evolving. While the IRS classifies crypto as property (not currency), ongoing discussions around crypto taxation, reporting, and classification could affect how these accounts are managed.

Any change in how crypto is taxed or treated by regulators (such as the SEC or IRS) could affect your IRA structure, fees, or withdrawal rules. For instance, reclassifying specific cryptocurrencies as securities could impose stricter compliance obligations on custodians and account holders.

Limited Custodian Options

Crypto IRAs cannot be held through traditional retirement institutions like Fidelity or Charles Schwab. Investors must rely on specialized custodians, and while options have increased, they are still relatively limited compared to conventional IRA services.

Custodians such as BitcoinIRA, Alto CryptoIRA, and BitIRA have established solid platforms, but fees, coin availability, and support vary widely. This limitation requires due diligence and comparison shopping before selecting a provider.

Custodian Risk and Operational Limitations

Unlike traditional financial institutions insured by the FDIC or protected by SIPC, most crypto IRA custodians are not covered by these federal protections. 

Instead, they often rely on private insurance for digital assets, which may have coverage limits. Additionally, account functionality may be more limited than you’re used to. 

Illiquidity for Short-Term Needs

IRAs are designed for long-term investing, and early withdrawals come with penalties and tax consequences, regardless of whether the asset is crypto. This illiquidity becomes especially risky if crypto prices fall and you need emergency access to funds.

Withdrawing funds before age 59½ usually results in a 10% penalty plus taxes (for Traditional IRAs), making crypto IRAs unsuitable for short-term speculation.

Tax Implications of Crypto IRAs

Understanding the tax implications of Crypto IRAs is essential before adding digital assets to your retirement portfolio. While investing in cryptocurrencies through a self-directed IRA can provide powerful tax benefits, it’s crucial to follow IRS guidelines to avoid unnecessary penalties or taxable events. 

The structure of your IRA—Traditional or Roth—determines when and how you’ll be taxed on your contributions, gains, and withdrawals.

Below is a detailed breakdown of how crypto IRAs are taxed:

Crypto IRAs Are Tax-Advantaged Accounts

The Internal Revenue Service (IRS) classifies cryptocurrency as property for tax purposes. This means that buying and selling crypto typically triggers capital gains taxes. However, when held within an IRA, these gains are not taxed at the time of the transaction.

This is a significant benefit because it allows your investment to grow tax-deferred or tax-free, depending on your IRA type.

Traditional Crypto IRA

A Traditional Crypto IRA operates similarly to a standard Traditional IRA, with the following tax characteristics:

• Contributions are made with pre-tax dollars and may be tax-deductible depending on your income and eligibility.

• Capital gains, interest, and dividends are tax-deferred, meaning you don’t pay taxes as your investments grow.

• Withdrawals are taxed as ordinary income when you begin taking distributions after age 59½.

• Early withdrawals before age 59½ are subject to a 10% penalty in addition to income tax unless you meet IRS exceptions.

For example, if you invest $20,000 in Ethereum through a Traditional Crypto IRA and it grows to $100,000 over 15 years, you won’t owe capital gains tax along the way. When you retire and start withdrawing, the $80,000 in profit will be taxed at your ordinary income tax rate.

Roth Crypto IRA

A Roth Crypto IRA offers the potential for tax-free growth and tax-free qualified withdrawals:

• Contributions are made with after-tax dollars, so they are not deductible.

• All growth and gains within the account are tax-free.

• Qualified withdrawals (after age 59½ and accounts held for at least 5 years) are entirely tax-free, including original contributions and gains.

• No minimum distributions (RMDs) are required during the account holder’s lifetime.

What this means is, let’s say you contribute $6,500 annually to a Roth Crypto IRA and invest in Bitcoin. After 25 years, your account grows to $1 million. When you begin withdrawals at age 60, you owe zero taxes—regardless of how much Bitcoin appreciates.

No Capital Gains Tax on Crypto Trades Within the IRA

A unique benefit of Crypto IRAs is that you can buy and sell cryptocurrencies within the account without triggering taxable events.

Every trade must be reported on IRS Form 8949 in a regular taxable crypto account and may incur short-term or long-term capital gains tax. But within an IRA, you can actively manage your crypto holdings—rebalance, take profits, or cut losses—without immediate tax consequences.

Contribution Limits Still Apply

Crypto IRAs are still subject to annual contribution limits set by the IRS:

• For 2025, the limit is $7,000 (or $8,000 if you’re age 50 or older).

• These limits apply across all your IRA accounts, not just the crypto ones.

• Income limits may affect your ability to contribute to a Roth IRA directly.

Required Minimum Distributions (RMDs)

If you hold a Traditional Crypto IRA, you must begin Required Minimum Distributions (RMDs) starting at age 73 (as of 2025 under current law). This means you’ll be forced to sell a portion of your crypto each year and take it as a distribution, which will be taxed as income.

Failure to take RMDs results in a steep penalty—25% of the amount you were supposed to withdraw. Roth IRAs, by contrast, do not require RMDs, making them more flexible for long-term tax planning.

Conclusion

As the guide explains, understanding how to invest in crypto via your retirement accounts can give you a long-term edge with tax advantages, diversification, and potential growth. 

Getting started involves choosing the right self-directed IRA custodian, knowing your account type, and staying compliant with IRS rules. 

As more investors explore crypto for retirement, aligning your strategy with clear financial goals and professional insight will help you make confident decisions that support your future income and security.

Frequently Asked Questions