If you're in crypto then you operate with an element of wealth consciousness. You operate with an awareness of energy and are always looking for improvement. In addition, here's A Powerful Crypto Move For Your Retirement Account.
What's Your Plan?
The most powerful strategy in planning longer term is simply stated: having a plan. While that may seem to be an oversimplification, it's so true.
How many people do you know whether you're 25 or 50 that look at the future and think, well I just need to be planning for retirement but their actions are not aligned?
There's plenty.
Regardless of what your plan is there is tool that you could be using today that in my opinion is a secret weapon of sorts when it comes to crypto.
It's called the Self Directed Individual Retirement Account in the United States. There are similar vehicles in other countries that go by different names, but for this article let's look at the SDIRA and why it is a critical tool in your crypto retirement planning.
SDIRA Origins
Through unofficial channels and individuals this author has met along the way, the underpinning for Self Directed IRA's originated out of interest and need by congressional staff.
What this means is congressional staff sought ways to increase their personal leverage over their own retirement assets. In doing so they originally sought to have language introduced into current bill structure around Individual Retirement Accounts to allow a self-management component.
When those in broader circles became aware of this provision, interest and efforts were put forward to include the public at large.
Isn't that what legislative bodies are supposed to do? Create opportunities for the public. Cough cough....
So from that time several decades back, today an opportunity exists for individuals to manage their own "Self-Directed" retirement account.
While it may not be quite as simple and streamlined as you would expect, it's still easier than you would think.
KEY TAKEAWAYS (from Investopedia)
A self-directed IRA is an alternative retirement account overseen by a financial institution, in which the account owner can choose to put money into alternative investments and to self-direct those investments.
Investments in a self-directed IRA can include a variety of options, such as real estate, precious metals, mortgages, or private equity—provided the investments don't run afoul of tax regulations.
This type of IRA differs from a standard IRA, in which the custodian determines which types of investments a participant can own, and typically opts for highly liquid, easily-valued products such as stocks, bonds, mutual funds, and ETFs.
How This Applies to Crypto
Under the current framework, since Crypto is considered property under the tax structure, the ownership can be treated much like that of real estate when it comes to a self-directed IRA.
Now this author has no illusion that as mass adoption moves closer and closer in the crypto space, all of these rules and classifications could change, but for today, here's the 4-1-1. (Not that anyone uses this anymore but you used to dial 411 for information, just in case you were wondering.
The most intriguing part about holding crypto in your SDIRA is that you hold your own private keys. BOOM! That is amazing right!
Here's the thing though. Simply stated the biggest issue when it comes to SDIRA's is the topic of self dealing. i.e. living in your SDIRA property or taking a paycheck from a SDIRA asset or any other number of potential tax triggering events.
The same holds true for crypto.
"A self-directed IRA is not a plan you manage completely on your own. You’ll need a custodian or trustee to administer the account. - A self-directed IRA is most commonly custodied with a passive custodian.”
Snapshot of What is Needed
So far if this sounds interesting to you, there's more you'll need to know.
In general there are 3 topics you will need to check off in the quest of setting up a SDIRA.
First of all you will need a custodian of the "account". Most Trust or Equity management companies are capable of this, yet there are only a handful with the expertise about operating in the crypto space. This type of service has a yearly cost associated with it.
Many equity management companies have a percentage based fee. You don't want those, because they practically will not be holding your assets. They are the custodian on paper, so you will want a fixed fee organization.
The second piece to this puzzle that you will need is an Individual Owner LLC or which you will be the "manager". Those are easy enough to set up in any state, and at the moment in the U.S. Wyoming is the most crypto friendly when it comes to LLC's for this purpose.
This is partly due to congressional representation being very favorable toward crypto. Even one of the senators is a huge bitcoin fan. Along with the LLC, if it is out of state you will need a "representative" address. They are basically a service that receives mail or any other correspondence on your behalf and is the business address for the LLC>
The third and final step in this process is having a business bank account which an be a checking or savings account.
Once you have all three of these in place you have the basic framework for operating a SDIRA.
Looking Back to Go Forward
There's more to running your own SDIRA than as you may have done in a traditional or roth IRA. Many of the same principles apply in terms of using Dollar-Cost-Averaging approaches and making sound investment decisions.
Personally, this author has found the risk reward profile to be much more favorable with managing a crypto retirement portfolio. It's definitely not like buying 100 shares of Apple and letting it sit for 20 years. You could find yourself moving in and out of positions on a daily basis depending on what your investment strategy is.
Also it is worth noting that the administrative cost is a fraction of what I have seen anywhere else. Having had managed retirement accounts that were turning 12-15% yearly returns in exchange for 1% of capital fee, the few hundred dollars a year that go to the equity or trust along with annual LLC fees is negligible.
Be sure to check out the links below for more information on topics including self-dealing and the IRS FAQ document. Happy Investing!
Be blessed!
RESOURCES:
https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-contributions
https://www.irs.gov/pub/irs-pdf/p590b.pdf
https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section408&num=0&edition=prelim
Any recommendations on other states in the crypto friendly category?