Matthew Roed, a registered nurse residing in Golden Valley, Minnesota, has found that social security might not be as promising as investing in Bitcoin. Roed has spent over 16,000 hours researching all things related to Bitcoin, and his conclusion is that investing in cryptocurrency is the key to a comfortable retirement. He believes the best way to do so is by utilizing a tax-free, self-directed individual retirement account (IRA).
Roed explains that since Bitcoin is legally classified as property by the US government and his crypto is inside an IRA, he can significantly reduce his taxable expenses due to the exponential growth. This bet has paid off for Roed so far, as his retirement portfolio has grown from an initial investment of $30,000 to a substantial $250,000. Although it is down from its peak of $500,000, Roed remains confident in his belief that Bitcoin is the future.
Despite facing skepticism from his family and friends, Roed continued to invest in the market. He recalls feeling lonely and frustrated while pushing himself to invest more. However, he now feels vindicated in his decision to invest in Bitcoin and looks forward to enjoying a comfortable retirement.
BitcoinIRA
BitcoinIRA launched in May of 2016, Giving investors the tax advantages of an IRA while investing in a high-risk/high-reward alternative asset class, similar to other IRAs. However, instead of being financed by gold, cash, and bonds, it is supported by Bitcoin.
According to Chris Kline, the CEO of BitcoinIRA, the company boasts over 100,000 individual account holders, including young clients who are just 18 years old. However, Kline revealed that the majority of their account holders, specifically 75%, are aged 45 and above, implying that BitcoinIRA is no longer a platform targeted towards a young audience.
Aside from Bitcoin, BitcoinIRA now offers a wide range of cryptocurrencies, including Ethereum and litecoin. Campbell Harvey, a finance professor at Duke University, believes that diversifying one’s investment portfolio is the way to go. He stated that having a wallet that only has exposure to a single cryptocurrency, such as bitcoin, doesn’t make any sense because while bitcoin is currently the most important cryptocurrency, its share of the total capitalization of cryptos has decreased over time. Harvey also pointed out that there are numerous other tokens available in the market.
In 2017, CNBC first profiled BitcoinIRA, reporting that the company had served $6 million in transactions for 700 account holders. As of this month, BitcoinIRA has surpassed $1.5 billion in transactions throughout its existence. The crypto pension space has also seen a surge in options available to investors, making it more competitive than ever before.
A recent survey of there has been a significant increase in the number of financial advisers recommending cryptocurrencies to clients. According to a recent report, 14% of over 500 financial consultants now use or advise on cryptocurrencies, compared to less than 1% in 2019 and 2020.
The Keeper of the IRA Kingdom Trust is providing its users with the opportunity to diversify their investments in up to 20 different cryptocurrencies. According to CEO Ryan Radloff, the company currently holds a staggering $17 billion on behalf of its customers, out of which $2 billion is now invested in cryptocurrency. This marks a significant increase from the $350 million that was invested in cryptocurrency just a year ago.
Radloff explains that the demand for including Bitcoin in retirement savings is growing at an exponential rate. He notes that individuals are no longer content with having zombie retirement accounts that limit their investment options to just three target-date funds. Instead, people want to exercise more control over their hard-earned money and have access to hard assets that will appreciate in value over the long term. The trend toward greater investment choice and flexibility is an encouraging development and one that the IRA Kingdom Trust is proud to support.
ANGER vs. Roth IRA vs. 401 (k)
The utilization of cryptocurrency-backed retirement portfolios is gaining traction in popularity, but there are still significant limitations to consider. While there are various ways to invest savings for retirement, such as an employer-sponsored 401(k) or a Roth IRA, few of these options allow for alternative assets like gold or cryptocurrencies.
This is why the self-directed IRA is the primary pension vehicle for holding cryptocurrencies, according to Shehan Chandrasekera, a CPA and head of tax strategy for CoinTracker.io. The self-directed IRA is an account that investors open with a keeper, make all investment decisions, and all income is tax protected until retirement. Companies such as Kingdom Trust and BitcoinIRA follow this model.
Tyrone Ross, CEO of Onramp Invest, explains that “as for retirement accounts, in this moment, with bitcoin, they are IRAs, IRAs, IRAs.” Onramp Invest provides software that assists financial counselors in tracking cryptocurrency investments for their clients. Ross further explains that “because it is considered property from the IRS, that’s why you’re seeing the self-directed IRA space explode. There’s a lot of regulation to pass before entering 401(k) space.”
Investors should take note of the limitations and regulations surrounding cryptocurrency-backed retirement portfolios before making any investment decisions. Despite potential benefits, it is important to approach this investment option with caution and thorough research.
There are exceptions. A small 401 (k) provider called ForUsAll announced last month that now allows participants to allocate up to 5% of their pension funds in 50 different cryptocurrencies assets, Including bitcoin, which will be guarded and managed by Coinbase.
According to Chandrasekera, companies such as BitWage and Digital Asset Investment Management are making efforts to breach the encryption in conventional retirement plans provided by employers. However, it is noteworthy that only a mere 1% of 401(k) plans offer bitcoin services. Hence, there is a considerable gap to be bridged before bitcoin gains prominence in major retirement platforms.
Fidelity informs its clients about retail brokerage options customers can’t buy or sell any cryptocurrency to Fidelity, Although companies associated with cryptocurrencies trading on public markets may provide exposure to bitcoin trade in theory The same value for Carlo Schwab.
Volatility Risk against Tax Savings
In an interview with CNBC, Roed discussed his investment strategy in cryptocurrencies that he pursues during his post-work hours after finishing a lengthy 14-hour night shift as a rehabilitation staff nurse. The reason why Roed invests in BitcoinIRA is due to the staking program that the company offers.
He lends his bitcoins to third parties in exchange for an annual percentage rate, or April, for the risk. Roed mentioned that the annual percentage rate is around 2%, which helps him offset the $240 annual fee and average transaction fees of 1% to sell and 5.5% to buy.
Kline, a representative from BitcoinIRA, added that customers can benefit from up to a 6% annual return percentage on cash and cryptocurrency, which helps balance out taxes. However, one of the most important considerations for investing in bitcoin is its volatility. The world’s most popular cryptocurrency is trading at half of what it was worth in April.
Harvey, another representative from BitcoinIRA, explained that, unlike the stock market, bitcoin is much more volatile. He emphasized that it is naive to assume that bitcoin will continue to increase in value indefinitely. There will likely be limitations, and investors need to consider this carefully before investing.
Beyond the risks of volatility, the Securities and Exchange Commission has also put in guard there is a potential for fraudulent activity when engaging in Self-directed IRAs that involve cryptocurrency.
Despite the challenges, Kline maintains a positive outlook. He recently recounted to CNBC a story of a customer who invested approximately $1.5 million in Bitcoin back in April 2020, when the token was being traded at around $7,335. Today, the investment is worth well over $6 million, demonstrating the potential for significant returns in the cryptocurrency market.
Case of studio BitcoinIRA
| Date | Quantity | Unit price | Total purchased | Current unit value Current | Total current value |
|---|---|---|---|---|---|
| April 9, 2020 | 193.295 BTC | $ 7,335 | $ 1,417,859 | 32,416 | 6,265,850 |
According to Kline, BitcoinIRA is a highly advantageous option for those who deal in cryptocurrency, primarily due to the tax break it provides. If a taxpayer with a middle income were to sell their Bitcoin holdings today, they would not be required to pay any taxes on the crypto that is held within their BitcoinIRA.
However, if the same person were to hold their Bitcoin in a Coinbase account, they would have to pay a hefty 22% short-term capital gains tax or a 15% long-term socket tax. Kline believes that this quantitatively clear reasoning is what makes investing in Bitcoin assets through an IRA environment such a wise move.
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