First and foremost, investing in Bitcoin in an IRA or anywhere else only makes sense if you’ve carefully assessed your risk tolerance and decided you can stomach huge swings. You can assess your risk tolerance using this calculator. Bitcoin is only appropriate if your risk profile is very aggressive.
Also make sure you consider the hefty fees of investing in a Bitcoin IRA against the tax advantages. Many charge setup fees, maintenance fees, and transaction fees, plus they often have significant account minimums.
In general, speculative assets shouldn’t make up more than about 5% to 10% of your overall investment portfolio. So if you have significant crypto holdings outside of your IRA, steer clear of a Bitcoin IRA.
Only consider it if you’re on track to retire comfortably with savings from other retirement accounts, like a 401(k) or 403(b). If there’s any chance you’ll need your IRA money to fund your golden years, that money shouldn’t be invested in Bitcoin.
Likewise, avoid investing in Bitcoin if you plan to use the money for other purposes, like a first-time home purchase or your child’s college tuition, both of which are popular uses for a Roth IRA.