View full transcript
JIM ARMSTRONG: If you have been wondering how you might invest in cryptocurrencies inside a tax-advantaged retirement account, you find yourself in the right spot. Hey there. Welcome to the Covering Crypto Livestream. I’m Jim Armstrong with Fidelity.
In today’s livestream, we’re going to be talking about the different strategies and ways you might consider incorporating cryptocurrencies into your individual retirement account portfolio. And we will talk about ways you can do that in a brokerage IRA as well as a crypto-only IRA. And, yes, we will absolutely take a lot of time to explain the differences and nuance between those two options.
To do that, and to answer your questions, we have a couple of fantastic guests who are going to be joining the livestream. I’d like to thank you both for taking time out of your day, and maybe just ask if you could just spend 30 seconds or so telling the audience a little bit about who you are and the perspective you bring to today’s livestream. And, Bronagh, we’ll start with you, if that’s OK.
BRONAGH CREEGAN: Yeah, great. Hi, Jim. I serve as the experience lead for Crypto Account Opening and Maintenance. And my goal is to ensure that the crypto IRA account opening journey is as simple, seamless, and intuitive as possible.
JIM: I love all three of those adjectives. That’s great. And, Rita, how about you?
RITA ASSAF: Well, I lead our small-business retirement product teams, when we help clients plan for retirement through our various tax-advantaged savings vehicles.
JIM: Cool. OK. And then Kelly Costa is also standing by. She typically supports our larger crypto education efforts. But for today, she’s going to help facilitate some of the interactive elements with the livestream. Hey, Kelly.
KELLY COSTA: Hey, Jim. Happy to be here. Thanks for having me on today.
JIM: We’re actually going to start with a bunch of questions that came into us during registration. When folks registered for this livestream, they asked us a lot of questions. And we’re going to start with one from a registrant named Bill, who asks us how he can buy crypto in an IRA.
And so, to anyone who shares Bill’s question, I would say the answer to that question really depends on how you want to invest. Do you want direct exposure to cryptocurrency and direct ownership of cryptocurrency? Or are you thinking you’re more interested in indirect exposure and indirect ownership of cryptocurrency? We’re going to start off with the latter and turn it over to Rita, who can talk about possibly investing in cryptocurrencies inside a brokerage IRA, which would give an investor that indirect exposure.
RITA: Sure. So first, real quick, let’s talk about the three main account types you have for your brokerage IRA. So there are three—a Roth IRA, a traditional IRA, and a rollover IRA. And the thing to remember is that some of these have different tax treatments and eligibility. So, with a Roth, you’re saving with the ability to have tax-free access to your future earnings and contributions. With a traditional IRA, you’re saving for tomorrow and potentially reducing taxable income today. And then with a rollover IRA, your savings remain tax-deferred, much like a traditional IRA, but it’s mainly funded by rollovers from workplace savings plans. And so it’s generally used as a consolidation type account.
And so, in terms of investing in crypto with your IRA, you can invest in crypto-related stocks, crypto-industry ETFs. Sometimes these ETFs are called thematic crypto ETFs. And these funds typically invest in companies related to cryptocurrency, development, blockchain technology, digital asset services. So it’s not investing directly in crypto coin themselves, but has some sort of exposure.
You can also buy spot crypto ETPs in your brokerage IRA. These funds hold actual cryptocurrency. And if you already have an existing IRA, you don’t need to open a new one. You can actually invest indirectly in crypto through your current IRA if you want to. But, remember, with any of these choices, you don’t own the crypto directly. And we’ll be talking more about that.
JIM: Perfect. So that’s the brokerage side, the indirect side. Bronagh, the next question is headed squarely towards you so you can start talking about that more direct ownership of cryptocurrency. And this question from a registrant is, “How do crypto IRAs work?” And this is 100% your wheelhouse, so I’ll turn it over to you.
BRONAGH: Yeah, great. So with a Fidelity Crypto® account offered by Fidelity Digital Assets®, you can buy, sell, and securely store cryptocurrencies. Here’s a few key things to know about crypto IRAs and how they work. So Fidelity uses a two-account structure for cryptos within an IRA. And you can think of it as one IRA with two connected accounts, a brokerage IRA and your crypto IRA account.
Your brokerage IRA is the funding source for your crypto IRA. And all contributions and distributions flow through that brokerage IRA, which is offered by Fidelity Brokerage Services. These are the same brokerage IRAs that Rita just mentioned earlier.
So, to open a Fidelity Crypto® IRA, you must be a US citizen, at least 18 years old, and live in a state where Fidelity Digital Assets® provide services. Note that Fidelity Crypto for IRAs is not currently available in California or Oregon. The Fidelity Crypto IRA is offered through Fidelity Digital Assets. And it’s important to know that you cannot fund a crypto IRA directly from an external crypto wallet. All assets must move through your linked brokerage IRA. And all of the crypto purchases, that must be made with cash funded into that brokerage account.
So, within a Fidelity Crypto IRA, you can buy and sell the following cryptocurrencies, subject to availability in your state—bitcoin, ethereum, litecoin, and solana. The key distinctions with a Fidelity Crypto IRA is that it lets you invest directly in supported cryptocurrencies. This does not include all cryptocurrencies.
JIM: Right. And so, Bronagh, I just want to dive a little bit deeper on something you said about that two-account structure. So if someone watching right now, for example, says, “You know what? Ultimately, I think I am interested in a Fidelity Crypto Roth IRA.”. They need or would have to open, if they don’t already have one, a traditional brokerage Roth IRA, which would serve as the funding source for the crypto.
Again, they might already have that one. But, in any event, you do need both in order to have the crypto one. Did I say that right?
BRONAGH: Yeah, that’s exactly right. So you can open a like registration crypto IRA account for an existing brokerage IRA. Or you can open both the brokerage IRA and crypto IRA together in one streamlined process. Once your brokerage IRA is funded, you can move money in and out of your crypto IRA as needed. All deposits and withdrawals are tracked on that brokerage IRA. And you will find the money movement options on the transfer section on Fidelity.com, along with all of the other transfer tools.
JIM: That’s great. And, in just a few minutes, I know you’ve prepared a bunch of screenshots for us so you can walk viewers through the exact process about how to get those accounts open. So we’ll do that in just a minute.
But first, I want to hop over to another question that actually came in during the live chat of an earlier livestream we did that’s applicable here. The person asked, “Is crypto an option for my individual retirement account at Fidelity?” And, of course, by now, everyone watching should know the answer to that is yes. But, before we go any deeper, I want to just take a couple of minutes to recap what both Rita and Bronagh have explained there in terms of what types of investments can and cannot go into what account types here at Fidelity. And we’ve got a chart we can flash now to help you make sense of all of this.
We’re going to start with the brokerage IRAs, which are the kind that Rita was just talking about. And, again, a lot of folks watching right now might already have a brokerage IRA, whether it’s a traditional, a rollover, or a Roth IRA. At Fidelity, if you already have one of those brokerage retirement accounts, or if you open a brand new one, you can immediately start investing in those crypto-industry exchange-traded funds, ETFs, or those, Rita also called them, thematic ETFs, as well as spot crypto exchange-traded products, or ETPs.
Just another quick reminder that those thematic ETFs, those crypto-industry ETFs, are going to give investors exposure to the stock of publicly traded companies that do business in the digital asset space, broadly defined. And so, like many other ETFs, the ones we’re talking about here are built to offer the investor diversified exposure to the equities of companies in a specific sector. And, in this case, that sector is digital assets—cryptocurrencies.
ETFs are very different from spot crypto ETPs. Those are the ones that you probably saw in the news, especially a couple of years ago when the SEC approved them. A spot bitcoin ETP, for example, or a spot ETH—ethereum—ETP, has inside of it as its underlying asset only the respective cryptocurrency that’s mentioned. So inside a spot bitcoin ETP is only bitcoin, not stock of a company. And, in any event, ETPs and ETFs, those are the things that can go inside of a brokerage IRA, along with individual stocks of crypto companies, of course.
Actual cryptocurrency cannot go in Fidelity brokerage IRAs. So if you have an existing brokerage account, a brokerage IRA account right now, you cannot put spot bitcoin, or spot ETH, or solana, anything inside that. You cannot invest directly in actual coins or tokens inside a brokerage IRA. And it’s the exact opposite on the right-hand side of your screen. It’s just the inverse.
If you open a Fidelity Crypto IRA, the only thing you can put inside of that in terms of an investment is actual cryptocurrency. It’s a Fidelity Crypto IRA, so you can put actual spot cryptocurrency coins and tokens inside that account, whether it’s a Roth, a rollover, or a traditional IRA.
If you want direct exposure to actual spot crypto in your retirement account, then you would need this Fidelity Crypto IRA. And then, finally, as probably makes intuitive sense now, you can’t put other types of investments inside a crypto-only IRA. So no ETFs, no ETPs, no stocks, nothing else can go in a Fidelity Crypto IRA other than cryptocurrency.
All right. With that behind us now, we’re going to pivot gently to start talking about taxes, which, after all, is probably the incentive that makes a lot of people consider cryptocurrency in a retirement account in the first place—this idea that those account types can offer a way for digital assets to grow in a tax-advantaged fashion. We have a couple of questions now also from registrants.
Pamela wants to know, “Hey, what is the tax advantage to a crypto IRA?” And then a viewer named L asks if crypto is taxable in a Roth IRA. So pretty standard tax-related questions, Rita. And I am thrilled to hand them over to you.
RITA: Sure. Happy to help. So the potential tax advantages of the IRA types that Jim just mentioned, they exist no matter if you own crypto directly in a crypto IRA or if you prefer indirect ownership through a crypto ETP in a brokerage IRA. So the difference between different IRAs are, as I mentioned earlier, the tax treatment and eligibility.
So for Roth IRA, your income will determine if you can contribute to a Roth IRA. If you are, you’re eligible, then, that you might benefit from potential tax-free growth in retirement, as well as some withdrawal flexibility before that. And what I mean is that you can actually withdraw your contributions at any time, penalty- or tax-free. And that’s because you’ve already paid taxes on those contributions.
But any withdrawals of earnings would only be tax-free if you’re at least 59½ and you’ve had your Roth IRA for at least five years. So I want to be careful with that, because a lot of people miss that and accidentally make a mistake. With the traditional IRA, your income determines if you’re eligible to deduct contributions. And, even if you aren’t, you can still contribute to a traditional IRA. But those nondeductible contributions would need to be tracked and reported on your taxes each year. And that’s also something that people forget. But a traditional IRA provides tax-deferred growth potential on investments and potentially tax deductions for contributions, which lower your current taxable income, meaning you wouldn’t be taxed until at least age 59½ if you start to draw down from your accounts during that time.
One callout, though, is that traditional IRAs do have what we call RMDs. These are required minimum distributions. And, actually, Roth IRAs do not have them. A rollover IRA is actually the same as a traditional IRA in its tax treatment. It has tax-deferred growth potential, but the funding is different.
So, rather than contributions, the account’s funded by employer retirement plan rollovers—so, for example, a 401(k) or 403(b). However, required minimum distributions also apply to those accounts as well.
JIM: Excellent. Thank you for that talk. Talking taxes is always something you do so well. So we appreciate it. Similar question now from John that came in during registration. We can pop that up just to make sure that no one’s getting stuck on exactly how this works for crypto. John says, “Can I invest in bitcoin or other crypto inside my Fidelity Roth IRA so I don’t have to pay taxes on my gains later on?” I’m smiling because the phrasing almost makes it sound like John’s trying to pull a fast one on the IRS or something.
But, yeah, the point is, assets inside of a Roth IRA, by definition, have been purchased with money on which you already paid taxes—whether that asset is bitcoin, actual bitcoin, spot bitcoin ETP, bitcoin-related ETF, or any other thing that goes in a Roth IRA. So assuming you meet all the criteria, John, that Rita just laid out a couple of minutes ago, the answer is yes—and just like the question that came in from L a moment ago.
But since John is asking about holding cryptocurrency directly in his question, Bronagh, that means, again, he would need a Fidelity Crypto account. And he would need a separate account for that, right?
BRONAGH: Yeah, that’s correct. So Fidelity Crypto IRA supports Roth IRAs, as well as traditional and rollover IRAs for US residents who are over 18 and in eligible states. Funding has to be done and cash transferred from the linked brokerage IRA. And direct transfers from personal wallets, as I mentioned earlier, and exchanges aren’t permitted due to IRS rules. All purchases must be made with the cash inside the IRA. So the structure allows eligible investors to benefit from tax-free qualified withdrawals on any gains within the Roth IRA.
JIM: And, Rita, not to put too fine a point on it, but same tax treatment, regardless of whether it’s a Fidelity Crypto IRA or brokerage IRA.
RITA: Yes. You got it right. Same tax treatment according to the tax advantages of that account and when you withdraw. So I’m surprised and love that everyone actually was aware of that and knew that. So thank you.
JIM: Absolutely. I got a question now from VJ that came in during registration. I seem to get a lot of questions like this. VJ is asking, “Does Fidelity have an IRA in which we can hold bitcoin?” Absolutely, yes. “If so, I’d like to create or add to my current Roth IRA slash IRA or 401(k) retirement accounts.”
All right, VJ, you’ve thrown us a bit of a curve. And so that requires a slightly nuanced answer to your question. So the answer, obviously, is “yes” to the IRA. Fidelity has exactly what you’re describing right now. However, if you want actual bitcoin or any cryptocurrency, as I said a moment ago, you can’t add that to an existing brokerage IRA. Those have to go in a crypto IRA.
It is, however, a totally different story for your 401(k). We sometimes call those your workplace retirement accounts. It’s the retirement account, and maybe it’s a 403(b) that you have through your employer. So today’s conversation is worth noting—we’re only talking about those individual retirement accounts that you set up yourself.
If you’re talking about a workplace account—again, a 401(k), a 403(b)—you’re going to have to connect with your employer, maybe your workplace plan’s recordkeeper, to find out whether or not bitcoin or any other cryptocurrency is what they would consider to be an eligible investment inside that plan. Those decisions are made at the employer level, so that’s where you would want to check either with your, again, with your recordkeeper of your plan sponsor, or perhaps start with your company’s or your employer’s HR department to find out how you could begin to learn that. But, again, that’s a workplace decision.
Bronagh, we said a moment ago that you would help walk people through the process of actually opening an account if they are interested in a Fidelity Crypto IRA. So I’d like to start you off with that. And then I probably will throw a couple of questions your way as you’re sharing.
BRONAGH: Sure. Sounds great. So when you’re opening a Fidelity Crypto account, as with any accounts, you’ll find the “Open an Account” button on the top right-hand side of Fidelity.com. So if you just click on this “Open an Account” button, you’ll see a page that shows some of our more popular offerings. And you may find a tile with “Opening a crypto account directly” on here. But if not, just scroll down and you’ll see that “all accounts” options.
And so if you click on this “all account” option, you will see a filter on the left-hand side, a filter area, where you can filter on crypto, and you’ll see all of the cryptocurrency offerings—our taxable offering along with the three IRA offerings that we currently have.
JIM: Actually, sorry, I’m going to hop there. So this is a great point. So we offer just the ability to have a Fidelity Crypto account sort of like a regular old brokerage account, right? And you could buy cryptocurrencies there. So some folks might have that, or they might not.
But let’s say someone watching right now is only interested in a Fidelity Crypto IRA account, whether it’s traditional, Roth, or rollover—you don’t also need to have the Fidelity brokerage account, right? Crypto brokerage—
BRONAGH: That’s correct. Yeah. If you only want the IRA accounts, you’re free to open any of those. Or if you want to open both, you’re free to open both. So you can open one of each if you care to.
JIM: Cool. Thank you.
BRONAGH: And so, in here, you can select “Crypto” and then pick the offering that you want. In this instance, we selected the rollover. And we wanted to point out here that if you wanted to learn more about the cryptocurrency offerings that we have, you can click on this “more about” option. Or if you want to just get right into the account opening process, you can click on “Get started.”
And if you’re logged in and you already have an eligible account, you’ll see that account showing here on the screen. So, because you’re in the rollover and they also have a rollover IRA brokerage account, that’s an option that they can link the crypto account to. Or they can go through the process and open both two new accounts in a dual flow. So they can open their crypto and brokerage account at the same time.
And if they hit “Next,” they’ll have an opportunity here to either fill out their information that they’ll need to for the account, or they will see prefilled information here under your personal information. And it shows on top the two accounts that they’re going to open. And then they’ll see the important documents and confirmations that we would like all our customers to review, take a look at.
Scroll down to the bottom, and just to have an acknowledgment of receiving this information. And then they can hit “open” their accounts. And then the next thing they’ll see is that new account number provided to them.
JIM: Excellent. I have a viewer question that I think is well timed for you right now. We get a lot of questions about custody and storage on the livestream. And so Trevell asks, “I self-custody my personal bitcoin using cold storage. For bitcoin held inside a crypto IRA, how can investors ensure comparable safety and reduce counterparty risk?” So, in essence, he’s asking for the high-level answer. What’s that structure?
BRONAGH: Yeah. So all crypto assets held in a Fidelity Crypto IRA are custodied with Fidelity Digital Assets. And Fidelity Management Trust Company is the IRA custodian.
JIM: Cool. OK. Got it. And, by the way, all those PDFs and information that you linked to or that you showed links to earlier—definitely worth customers taking a look and opening before they open an account, reading all of those. A lot of those questions, like Trevell’s and others, are answered in those exhaustive but useful PDFs.
BRONAGH: Absolutely.
JIM: Just about ready to head to live Q&A now. But before we do, I want to spend just a moment or two talking about risk tolerance, a really important consideration for anybody thinking about investing in cryptocurrencies, but particularly investing in an IRA. Rita, what would you say to people who are watching now trying to navigate volatility in this space?
RITA: Well, I would say, when you look at crypto, you want to make sure, especially in a retirement account, that you have not just crypto but your mix of investments that reflect your time frame for investing—or time horizon; we call it that too. And for retirement, this means the number of years until you retire. Then there’s your tolerance for risk, which is how upsetting are market fluctuations for you.
And then your financial situation, which is your ability to invest this money and then potentially leaving it in the account for decades. So you’ll want to revisit your investment portfolio in a retirement account periodically for any changes and adjust for any risk tolerances. As you mentioned, with current market volatility, it’s a good time to look at it, although I would say do not make an emotional trade just yet if things get too rocky. So I would echo that.
But if you’re thinking of crypto specifically, there are some special considerations. Crypto typically is a riskier asset class because of its volatility. So you want to consider whether the volatility of crypto itself fits the risk you’re willing to endure. And because crypto is highly volatile, you could actually lose the entirety of your investment.
So when you put that in the retirement construct, you could lose that money. And that means, potentially, saving more or even working longer to make up that investment. So that’s where I would say, understand your risk tolerance, your time horizon, and get educated on whether crypto makes sense for you, and then the type of exposure of crypto that might make sense for you.
JIM: Excellent. And just to follow up on that—our last two registration questions before we go to live Q&A, really, I think, continue the conversation, Rita, with what you were just talking about there. Robert says he’s three years away from retirement. He’s curious about what considerations he should have about adding crypto to what he describes as an already diversified retirement portfolio.
And Peggy’s just plain old looking for the overall risk of purchasing crypto in an IRA. So we’re going to stop miles short of giving investment advice. That’s not what we do. But, generally speaking, with someone with Peggy and Robert’s concerns, how would you answer them?
RITA: Well, first off to Robert, congratulations. You’re almost there.
JIM: Right?
RITA: So I would say, first off, more than anything, make sure you have a retirement plan, if you don’t have one already. So get organized and understand your essential expenses in retirement, such as health care, food, housing. And make sure that those are covered by predictable income sources, like Social Security, like pensions, or income annuities.
And then, as you build that plan, it’s important to include some investments with growth potential, because that helps to keep up with inflation. So that’s where crypto could play a factor in that growth bucket. But you also want to be careful about being too aggressive in that. Because, in general, as you get closer to retirement, it’s time to usually de-risk or take some risks off the table because you want to consider if you have time to ride out any downturns with any volatile assets like crypto.
So, again, I’m beginning to sound like a broken record, but consider whether the volatility fits the risk you’re willing to endure and that time horizon. And, as we mentioned, in the event crypto goes to zero, that has an impact for your retirement.
JIM: Yeah. Absolutely. One thing we always like to mention, too, is that you really want to build up your crypto-related education, crypto confidence prior to investing or while you’re investing. And so Fidelity spends a ton of time and effort getting as many educational resources out there for you as possible. Fidelity.com/LearnCrypto is, I think—biased, of course—but I feel like it’s an amazing resource for people who are looking to start their learning journey when it comes to crypto, or keep going. There are short-form articles, long-form articles, all of the livestreams, like this one, are there, animated videos, infographics, FAQs, tons of resources there to help keep you up to date with not just everything that’s happening in cryptocurrency now, but the background stuff, too, that’s going to help you feel like you’re getting smarter on the topic, which is ever-evolving. So, please, if you’re going to bookmark anything, bookmark Fidelity.com/LearnCrypto.
Cool. All right. We’re going to head to live Q&A; bring Kelly back in.
KELLY: Awesome. Sounds great. And, yeah, thank you everyone who has asked questions in our chat. A bunch of the questions that were asked in the chat were covered throughout the show today, so great job anticipating some of those in advance. But, yeah, let’s start with this one.
We’ve had a couple of questions on “Can I transfer crypto into an IRA?” And Dan asks, “Currently, I have a crypto investment platform with Fidelity. Could I transfer those funds to an IRA crypto account?”
JIM: Oh, interesting. So I was talking to Bronagh about those two different accounts—the Fidelity Crypto account, Fidelity Crypto IRA. Sounds like Dan has some assets in his Fidelity Crypto account. Bronagh, what are his options in terms of getting those into an IRA?
BRONAGH: No. So at this time, if he wanted to get assets over, it would have to come directly through that linked brokerage IRA account. So we can register all contributions and distributions through that account.
JIM: So that means, logistically, someone would have to sell out of their position in crypto. How would that work?
BRONAGH: They would need to liquidate the position that they had in their Fidelity Crypto account back to the brokerage account and then transfer it over to the IRA account that’s associated with that IRA crypto.
JIM: Got it. Understood. OK. Kelly, what’s up?
KELLY: Great. And then we actually have a terminology question that I felt was good to cover here. So we have this question, “What do you mean by ‘spot crypto’?” Which is one that we do tend to get. So if we could just spend a second defining that.
JIM: Yeah. It’s a term that goes back to commodity days, where, essentially, you’re buying on the spot. So when we talk about spot crypto or spot bitcoin, that’s just going into the open market and buying cryptocurrency right then and there. That’s also the word that carried over, for example, a spot bitcoin ETP, the exchange-traded product.
I guess it’s a little bit of unnecessary jargon, but it’s a good way to differentiate that you’re buying actual cryptocurrency versus buying an exchange-traded product in that case. So spot just means you’re buying it in the open market.
KELLY: Awesome. Thanks. So the next one we have is, “Is the Roth five-year requirement determined by when the account is opened and first funded? Or does the five years start after the last deposit to the Roth?”
JIM: Oh, great question. Rita?
RITA: Yes, definitely. It’s when you first fund any Roth IRA. So because you can’t directly fund a crypto IRA, it’s going to happen in the brokerage IRA. And that starts the clock. So it’s when you first fund it and hold it.
JIM: All right. So if I opened it today and funded it today, my clock starts now. And if my last contribution is eight years from now, doesn’t start then. It starts today.
RITA: That’s right.
JIM: Excellent. OK. Great. Kelly, any others?
KELLY: Yeah, we have a couple more. So let’s move to this one: “What would be the major watchout in deciding to roll over an existing retirement account into my traditional IRA versus the crypto IRA if I wanted to invest in crypto?”
RITA: Well—just jumping in here, because I hear “roll over” and I go . . .
If you’re looking to roll over—is it from the rollover IRA to the traditional IRA? Is that what was the question, Kelly? You don’t actually need to do that because there is crypto rollover IRA. So you could actually use the funds in that brokerage rollover IRA to fund the crypto rollover IRA. So you don’t need to do that transfer.
But I think one risk is if you’re combining rollover dollars with your traditional IRA dollars, you run the risk of mixing rollovers and contributions. And so, should you ever want to roll any money back to your 401(k) plan, it may limit you because you’re mixing both. There has been a reason why they’ve been isolated into two different account types over the years.
JIM: Kelly, can you ask that question again? I want to make sure that I’m getting it.
KELLY: Yeah. It was a long one. So I’ll repeat it. “What would be the major watchout in deciding to roll over an existing retirement account into my traditional IRA versus the crypto IRA if I want to invest in crypto?”
JIM: OK. So it’s a pile of money here. Do I put it in a traditional IRA or a crypto IRA? And so I’d love to hear both of your thoughts. But when I hear the question the second time, my thought is, if it’s going into a Fidelity Crypto IRA, you are, by definition, really limiting the number of things you can invest in. Inside a Fidelity Crypto IRA, if you’ll remember, you would be 100% invested in cryptocurrency. And, again, you could pick from several there. But, ultimately, everything would be in cryptocurrency. Bronagh, that’s correct, right?
BRONAGH: Yeah. And you could use both. So you could put a portion of your money into that traditional brokerage IRA, and you could put a portion into the traditional crypto IRA so that you could be able to split some of the risk across your accounts. But, always back to Rita’s point, it all depends on your risk tolerance, where you want to hold that cash.
JIM: And, again, miles away from giving advice—but, Rita, if somebody said, “I’m taking everything and going 100% into a crypto IRA,” you would probably ask them to reevaluate their risk tolerance, time frame, and everything, right? What would you say?
RITA: I would say just that. If you’re willing to take that much risk—and that’s pretty aggressive, that’s on you—but I feel like you need to think of crypto in the context of a larger investment portfolio for your retirement.
JIM: Got it. Kelly, are there more questions?
KELLY: Yeah. We have this question from Jeff, who asks, “Is it possible to take in-kind distributions of crypto assets?”
JIM: In-kind distributions of crypto—
BRONAGH: You can take in-kind off of platform. So anything that you would want to take out of the crypto account would need to be liquidated back to the brokerage account.
JIM: Got it. OK, so that’s another question about whether or not there’s direct transfers out. It’s got to be liquidated and then it comes—
BRONAGH: Yeah, if you can in-kind transfer out. Yeah.
JIM: Got it. OK. Kelly, back to you.
KELLY: Yeah, we have one more here. And we did cover it a little bit, but I think it’s worth maybe just closing out with this question on volatility. So we have a question on, ”How should investors think about volatility when allocating crypto inside of an IRA?” So, Rita, I know you touched on that a bit earlier, but figured we could add it in here as well.
RITA: Yeah. It’s considered one of the more volatile and riskier assets. So when you consider that and how much to allocate, traditionally, people have kept a pretty low amount and some of that more extreme volatility into their account. So I would consider that.
I think some of the questions are somewhat related. “How much should I put from crypto into my IRA?” And that really does depend on you. And I’m going to go back to your risk tolerance and your time horizon, which I know is sort of like, “OK, thanks.” But you need to consider it as part of your larger portfolio because it could go to zero. And that’s a concern.
But this is where different types of crypto exposure may come into play. So are you talking about spot? Are you talking about the ETP? There’s different options that actually have different volatility that might allow you to consider that exposure versus just saying I’m going to go full-on into bitcoin spot.
JIM: And you’ve mentioned the risk of going to zero a couple of times. So let’s call out that every cryptocurrency is created differently. Some of them, you could make the argument they have the potential to have tremendous value. Others are straight-up scams, right? So one is probably more likely to go to zero than the other, although the risk is throughout. Any cryptocurrency could theoretically go to zero, but don’t think that all cryptocurrencies are created equally.
So that when you’re making your decision around volatility, and risk tolerance, and timing, be very deliberate about the specific coin or token that you are considering investing in, whether it’s in an IRA or another investment vehicle just in your brokerage account. They can, of course, go to zero. The risk is prominent, absolutely.
It also varies from coin to coin and token to token. And, by the way, “coin” and “token” are largely synonyms. But the point is every cryptocurrency that we’ve talked about today, every one that you see doing an internet search, they’re all very different. And you really, really want to be mindful about doing your research on each discrete one before investing. And, again, I would say Fidelity.com/LearnCrypto is a pretty great resource to do that work. Kelly, any other questions?
KELLY: No, I think the rest we did cover throughout. So I think that one is probably a good one to wrap on.
JIM: Excellent. All right. I want to thank all three of you for taking time out of your day to answer our questions today. Really appreciate it.
BRONAGH: Thanks, Jim.
JIM: For everyone watching, of course, thank you for taking time out of your day as well. Thank you for engaging with our polls and with our questions. We wrote down all the questions. We keep track of everything.
If you have any immediate questions that you might want help with, we want to make sure you are aware of our subreddit. It’s r/fidelitycrypto. If you go there, there is an amazing team of super-talented, kind, and smart people who are anxiously awaiting your arrival.
Ask them your questions. There’s a great community there of people who will answer those questions for you.
