You can sum up the appeal of a Roth IRA in three words: federal tax benefit. Add on top of that the new potential of huge earnings in cryptocurrency and you have a powerful combination. Earnings in a Roth IRA grow tax free as long as the owner abides by the Internal Revenue Service (I.R.S.) rules, and withdrawals are federally tax free once you reach age 59½ and have held the Roth IRA for at least five years.
Unfortunately, some people make too much money to contribute to one.
There is a way for high earners to bypass these limits, however: the “backdoor” Roth IRA strategy.
High-income taxpayers may create Roth IRAs indirectly. This involves a little maneuvering, but may be of interest to certain investors — and also can also be invested in crypto nowadays.
The “backdoor” IRA strategy typically starts with the creation of a traditional IRA. Thecontributions to this newIRA are usually non-deductible, because of the IRA owner’s high modified adjusted gross income. This new traditional IRA is fully or partly funded, and with a financial professional’s help, it is quickly converted to a Roth IRA, and any tax liability is paid. Sometimes finding an investment professional who has knowledge in cryptocurrency is a challenge but they are out there. Backdoor Roth IRAs are great potential environments for crypto.
