Topic: How and why to hold bitcoins in your Roth IRA (yes, you can do it today!) (Read 16954 times)

The reason to put your BTC into a Roth IRA is that then there will be no taxes on the gains.  So you "should be ready to pay" what exactly?  Why did you go off about online and hardware wallets?  Are you just a posting bot?  If so then I hope you die a horrible death (for a posting bot).  If a real person then WTF are you talking about?

Holding BTC whether in an online wallet or hardware wallet is a  good idea and will grow to reward you if you are patient enough and let it in bitcoin  for a year or even more but keeping it in a roth LLC will definitely attract some tax component and you should be ready to pay.

I tried to use BitcoinIRA.com.  I went through all the paperwork, moved all the money from my T.Rowe ROTH IRA to them and got ready to buy Bitcoins.  All of the sudden they said they would not do business with me because I had traded on LocalBitcoins.com and they have a policy of not doing business with anyone they can show has done business with LocalBitcoins.com.

So I got all my money back.

I then went to Broad Financial and they are great.  I am so glad that BitcoinIRA.com turned me down!!!  Broad Financial is a much better deal:

1) The flat fee at Broad Financial is less than the percent fee I would have paid BitcoinIRA
2) At Bitcoin IRA they hold the private keys to the Bitcoins, with Broad Financial I hold the private keys to my Bitcoins and they have nothing to
do with them!
3) At BitcoinIRA you can only buy Bitcoins and a few other cryptos.  With Broad Financial I can hold ANY crypto, gold, silver, stocks, bonds, pretty much anything allowed by the IRS.
4) With BitcoinIRA you must use their one broker to buy the cryptos.  This is the broker that will not do business with anyone who has ever traded on localbitcoins.com.  With Broad Financial you buy the cryptos (or gold or whatever) using checks in the checking account of your IRA which you have access and control over.

There is no question, Broad Financial is the better plan.

Am also interested in this.  
Regardless of the (failed) COIN ETF and (overpriced) GBTC fund,

An IRA LLC seems to be of great value

Cryptocoins defy the expected tradeoff that a Roth carries -- i.e., the lost earnings compared to the extra dollars of pre-tax investments that are normally able to compound.   Bitcoin could easily dwarf stock numbers and the tax benefit is far greater than the appreciation expected from a hypothetical 20% extra pre-tax coin.  That's precisely because Roth allows tax-free trading.  That darn IRS advisory makes tracking sales so confusing, and a way to to avoid triggering capital gains on every sale is a godsend. There's plenty of volatility and opportunity to hedge alt-coins, not to mention benefits from holding other assets without capital gains (like gold).  

That said, it sounds like it's $1500 for something that probably should cost $300.  

https://www.broadfinancial.com/self-directed-ira/ira-llc/ says the following:

"No longer confined by a bias towards stocks, bonds, and mutual funds, it can invest in almost any asset.

Theoretically this process could be performed without a facilitator. An individual investor could establish a new self directed IRA by a qualified custodian, and then open a LLC for the account. However, this path could potentially be dangerous for your retirement account.

It’s very easy to fill out the requisite documents in ways which will not legally conform to self directed IRA regulations. This could result in a rejection of your application, or even an implosion of your IRA with all of the accompanying penalties. With Broad Financial’s platform, the documents are guaranteed to be accurate and hassle-free."

Isn't there demand enough to figure out how to do this without the $1500?  Anybody good with legalzoom.com or nolo.com?

Holding btc in a roth LLC sounds like a good idea.

My main concern would be roth IRA's being taxed in the future as the deficit grows.

If I remember right, taxes and fines on 401k's have been steadily rising.

It could be safe to assume IRA's will be next on the tax hike list.

A very large bank has this asset on their restricted trading list.  Where are peeps trading this asset?

GBTC hasn't been following the BTC price very closely lately. For example, I bought some GBTC six weeks ago when BTC was priced around $900, and the value of my GBTC holdings are *down* 2.25% (and were down more than that a few weeks ago). Given that GBTC shares can be redeemed for actual BTC, I doubt the GBTC price premium will ever go into the negative significantly, but you can get caught in a situation where a significant premium can be absorbed in a sell-off before seeing any gains, depending on when you buy in.

All this effort is no longer necessary.  Just buy GBTC in your brokerage IRA, or maybe COIN next month, if we are lucky.

I've held my crypto in a Roth vehicle since 2013.  The value has increased  12x.  I saved more than 4x my original investment in tax liabilities already.  Keep in mind that if you need money, you can always borrow from the IRA.  You have to pay it back with interest, but you are just paying interest to yourself, so it's a wash, long-term.

Was hoping you can perhaps provide an update to this thread for those who might be considering mirroring your efforts.

The burden is on the tax payer to prove that they filed an accurate tax return.

Once bitcoin ETFs start trading then a much more cost effective way of owning bitcoin in IRAs and other investment accounts will become a reality. This will also likely increase the price of bitcoin over the long term.

That's why you shouldn't own large amounts of cryptocurrency unless you know how to store them securely. If hackers stole your private keys and thus your bitcoins, you should report the loss. Sure, you could be accused of such things but any accusers would be unable to prove their claims. The exact same situation could occur if you were holding, for example, physical precious metals in your self directed IRA.

If your IRA LLC received coins that did not belong to you, I suppose it could be problematic if you could not prove the chain of ownership in order to disprove self dealing. OTOH, if this is also the case then authorities would have a hard time proving self dealing. Simple solution: if this occurs, send those coins to your personal address so that they are not held by your IRA LLC.

If I had a Bitcoin for every time someone's told me that my investment ideas were bad...  :-)

The amount that can accumulate in various retirement accounts, then get converted to a Roth IRA, is not that small.  It adds up and grows over the decades.  If you merely put $4,000 away each year for 10 years, that's $40,000 right there alone.

You are right that paying $1,500 to set up your account would be ridiculous if you only had a few thousand to invest, but it's not so ridiculous if you're investing $15,000 or more.

The question you have to ask yourself is, do I expect to save more in capital gains taxes than it costs to set up the account?  That depends on the amount you're investing, what you expect the price to do, your income bracket, etc.

It's OK to have some risky investments as part of a retirement portfolio, but I would not recommend that anyone put more than 10% of their net worth into bitcoins at the very most.

I don't really see how receiving unsolicited spam bitcoins from absolute strangers violates the self-dealing rule.  Could you elaborate on this one a bit?

Any BTC transaction is publicly available on the blockchain. Any time you buy BTC and send it that the address in your BTC IRA the transaction will show up. There are many BTC address with large amounts of BTC that often receive spam transactions of a very small amount along with a public message.

There is no guarantee that your security will protect you 100% from theft of your BTC. In the event that hackers are somehow able to get your private key (they would send the BTC to an address they control) and you could be accused of withdrawing funds prior to retirement age (and be forced to pay the associated taxes on doing so). The anonymous nature of BTC would make it very difficult to prove it either way. When you file taxes the burden is on your to prove that your tax return is accurate. 

1) It's expensive compared to traditional methods of investing. However, a self directed IRA gives you a lot of control and flexibility. In terms of cryptocurrency investing, I'd say it's worth it for the ability to hold the private keys yourself. Also, cryptocurrency investing is a completely different ball game than traditional investing - we are not seeking returns of 5% - 10%, we are seeking orders of magnitude more. High risk, high reward.

2) That's your opinion based upon your own risk tolerance. I should note (as I did in my medium post) that you do not have to hold the bitcoins until you are of retirement age. You can sell them at any point in time and not trigger capital gains. You could then turn around and invest that money in other things such as stocks / precious metals / real estate.

3) It's not hard to avoid self dealing if you are intelligent and RTFM. The bitcoin addresses that belong to my IRA LLC have never been posted publicly and the funds are held in cold storage that is completely separate from the bitcoins owned by me personally.

Here you are: https://medium.com/@lopp/how-to-invest-in-bitcoin-within-a-tax-advantaged-retirement-account-4c742e564b52

Interesting thread with great info... thanks!

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This is a very bad idea for a number of reasons.

First this is a very expensive way to invest in your retirement. To pay $1,500 in order to "open (setup) your account" to be able to invest in BTC is a lot of money especially when considering the limited amount of funds you can invest in retirement accounts.

Second Bitcoin is a very risky investment for retirement. Bitcoin is likely a good long term investment, however it is very speculative and carries too much risk for retirement. There is a good chance that investing in Bitcoin could make you very rich, but there is also a good chance that Bitcoin will become close to worthless.

Third you have the issue with potential self dealing. If your IRA LLC were to hold BTC via the traditional way of a wallet holding/being in control of private keys then any time someone sends you a random "donation" to your public address you could potentially be accused of self dealing. Many very large BTC addresses often have small amounts of BTC with spam attached to them. The only real way to avoid this is to own BTC via a large exchange or other central fund. This would create risk that this entity could fail and/or steal your coins.

You should now write a how-to guide and sell it. Think of it as your own bitcoin derivative income.