Let’s walk through a fictional but instructive case to see how the principles play out in practice and why a careful path matters.
Profile:
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Sarah is 50, has a Traditional IRA worth $250,000 in stocks and bonds.
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She’s bullish on Bitcoin and wants to allocate 10% (i.e. $25,000) into it—but within her IRA.
Step 1: Evaluate Custodians
Sarah researches custodians and finds one that supports both equities and Bitcoin within the same IRA. She also identifies a self-directed custodian that only accepts crypto. The tradeoffs between merged vs separate accounts are explained in “Converting an Existing IRA to Bitcoin: Practical Steps and Pitfalls”.
Step 2: Initiate Transfer
She opens a new IRA with the crypto-friendly custodian and requests trustee-to-trustee movement of $25,000 from the original account. She documents FMV, retains timestamps, and ensures the process is custodian-to-custodian.
Step 3: Acquire Bitcoin
Using the custodian’s approved channels, Sarah converts the $25,000 into Bitcoin. She does not touch any private keys.
Step 4: Document Everything
She saves all logs, wallet addresses, trade confirmations, and keeps screen records. The guide’s checklists ensure she’s audit-ready.
Step 5: Monitor & Rebalance
Sarah sets a rule: if Bitcoin exceeds 15% or drops below 5% of her total IRA, she will rebalance. She also monitors custodial policies and fee changes regularly.
Challenges She Avoids
She doesn’t try to personally control the wallet, she doesn’t use unapproved exchanges, and she doesn’t ignore recordkeeping. These are some of the pitfalls flagged in “Converting an Existing IRA to Bitcoin: Practical Steps and Pitfalls”.
In this scenario, Sarah ends up preserving retirement tax advantages while adding crypto exposure under controlled, safe rules. Her method illustrates exactly how theory becomes practical, consistent with the deeper guidance in “Converting an Existing IRA to Bitcoin: Practical Steps and Pitfalls”.