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April 9, 2024

How To Buy Crypto with a Self-Directed Roth IRA with Checkbook Control

Key Points 

  • A Self-Directed Roth IRA allows you to invest in alternative assets, including cryptocurrencies.
  • A Self-Directed Roth IRA with checkbook control allows real-time investing by the account owner through an IRS-compliant LLC and dedicated checking account.
  • Broad Financial can help you establish a Self-Directed Roth IRA and subsequent IRA LLC, which can give you the ability to invest in crypto while receiving tax advantages.
Stacks of cryptocurrency line up in an increasing amount, showing that when you buy crypto with a Roth IRA, you can potentially recieve a high return on your investment.

Bitcoin. Dogecoin. Ethereum. Litecoin. These are just a few of the many cryptocurrencies out there that have made headlines and given investors a run for their money in recent years. Many people find crypto to be an intriguing and exciting investment with high growth potential.

If you currently have a Roth IRA and are considering investing in crypto, you may be wondering if you can hold crypto in your Roth IRA to receive tax advantages on any potential gains. After all, the crypto market, on the surface, appears to function similarly to the stock market in terms of buying, selling, and trading. 

Yes, you can buy crypto with a Roth IRA, but that Roth IRA generally must be a Self-Directed IRA (SDIRA) rather than a standard IRA. You may also consider taking it a step further by gaining checkbook control of your SDIRA. A Self-Directed Roth IRA with checkbook control can be useful for crypto investing because it will allow you to act immediately on crypto investing opportunities.

What Is a Self-Directed Roth IRA with Checkbook Control?

Upgrading your SDIRA to checkbook control is an ideal method for how to buy crypto with a Roth IRA.

A Self-Directed Roth IRA is a retirement account that gives you more control of your investments. With a standard Roth IRA, you can usually only invest in Wall Street products like stocks, bonds, and mutual funds. A Self-Directed IRA allows you to invest in alternative assets such as real estate, private businesses, promissory notes, and even cryptocurrency.

Checkbook control in a Self-Directed Roth IRA refers to the ability to write checks and send wires directly from a dedicated checking account for your everyday investment transactions, without going through your Self-Directed IRA custodian. You can execute trades and diversify your retirement portfolio whenever you see fit, all while enjoying tax-free status on any potential gains. This autonomy comes with the responsibility of adhering to IRS rules and regulations to ensure your investments remain tax-advantaged until distribution.

Self-Directed Roth IRAs differ from Self-Directed Traditional IRAs in that contributions are made with after-tax dollars. With a Roth IRA, you won't owe any taxes on withdrawals later on. Additionally, a Roth IRA has no required minimum distributions (RMDs).

How Does a Self-Directed IRA with Checkbook Control Work?

Let's say you identify an attractive crypto opportunity. To invest with a normal Self-Directed IRA (SDIRA), you would have to route your intent to your custodian and wait for the custodian to facilitate the transaction using your SDIRA funds. The process can take some time.

When you have a Self-Directed IRA with checkbook control, you have the power to place investments without involving your custodian. To gain checkbook control, you must form an LLC or trust for your SDIRA and then open a dedicated checking account at the bank of your choice. To invest in crypto, you will then use the name of your LLC or trust to open any crypto exchange accounts. You can then simply fund your crypto exchange account from your checking account owned by your IRA LLC or IRA Trust.

An investor checks the status of his bitcoin investments in his Crypto IRA.
An investor stares at their crypto wallet, which is considered one of the best methods for how to buy crypto with a Roth IRA.

Thousands of crypto coins exist, and they each generally offer their own value propositions to the public. Popular digital currencies like Bitcoin and Ethereum have earned recognition among many crypto enthusiasts. Both of these coins offer distinct characteristics, such as being a store of value (Bitcoin) or a platform for decentralized applications (Ethereum). 

As the first cryptocurrency, Bitcoin remains perhaps the most well-known crypto asset. However, it is important to note that, like any other crypto asset, Bitcoin's value can be volatile. Ethereum, meanwhile, is a decentralized platform that runs smart contracts. These are self-executing agreements with the terms of an agreement between parties being directly written into code, removing the need for intermediaries.

How to Open a Self-Directed IRA with Checkbook Control

With Broad Financial, opening a Self-Directed IRA with checkbook control is simple and streamlined. First, you’ll open a new Self-Directed IRA with our sister company and SDIRA custodian, Madison Trust. On the application, you’ll select that you’d like to establish a Self-Directed Roth IRA. 

To fund your Self-Directed Roth IRA, you’ll transfer or rollover all - or a portion of - your funds from an existing retirement account, such as an IRA or 401(k), or make an initial contribution.  

Next, Broad Financial will create a specialized, IRS-compliant LLC or trust for your IRA and take care of the paperwork. Once your LLC or trust is created, you will open a checking account in the name of your entity at the bank of your choice and instruct Madison Trust to send your IRA funds directly to the dedicated checking account.

Then, you can start investing with the power of checkbook control by simply writing a check or sending a wire from your new LLC or trust checking account.

A client service representative explains how to buy crypto with a Roth IRA to a prospective investor.

If you’ve been searching for information on how to buy crypto with a Roth IRA, you  might have seen specific Crypto IRAs and even Bitcoin IRAs. These are synonymous to Self-Directed IRAs with checkbook control. Learn more about what to look for in the best Crypto IRA and speak with a specialist at Broad Financial today! If you’re self-employed, consider Broad Financial’s Checkbook Solo 401(k).

Disclaimer: Broad Financial LLC does not provide legal, tax, or investment advice. Please consult with your tax or legal advisor before making investment decisions. 


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