The year is 2023, and we're long past the narrative that bitcoin is only for criminals, or that the government is going ban bitcoin. Bitcoin, as an asset, is already quite entrenched in the global economy (though its size and distribution is still quite small). People buy and sell goods for bitcoin around the world every single day. Companies and individuals hold bitcoin privately as individuals and as corporate entities. Bitcoin is here to stay.
Now that we know bitcoin isn't simply going to go to zero, what is the price going to be in 20, 30, years or more, and how do you take advantage of this price appreciation in a tax advantaged account? The good news, is that yes, you can capture bitcoin's growth tax free, and there are multiple ways to do it.
Why use tax advantaged accounts for holding bitcoin long term? Because taxes are going to be brutal for anyone who holds bitcoin long enough to see 100x or 1000x price appreciation. Depending on where you live in the in the USA, you could be paying more than 50% of your gains to the government through capitals gains tax at the federal and state level. That means the government gets to take more than half all your hard work hodling. Thank you very much loyal citizen!
So, the answer is to leverage the rules in a way that maximizes how you grow your wealth. There are a number of ways to do this, but the focus of this post is on how to get bitcoin into your IRA account.
There are two types of IRA, Traditional, and Roth. The Traditional IRA is “pre tax”, meaning you don't pay taxes right away, but you pay taxes as you cash out in retirement. The Roth IRA is “after tax”, meaning you pay taxes right away, but then you don't have to pay taxes when you cash out.
With bitcoin, it for most young people, absolutely makes more sense to do a Roth, since the expectation is that the price of bitcoin will rise significantly over the coming decades. You'll pay taxes based on your current tax bracket right now, likely somewhere around 15% to 30% depending on where you live, but it's better than paying 50% or more on the back end when you start cashing out. Peter Thiel famously built a 5 billion dollar Roth IRA using this same technique, where you put something with low value into the IRA (Paypal shares, in his case), then watch it grow exponentially over the years. He'll be paying $0 in taxes on that 5 billion dollars. Congrats Peter!
Of course, your age and financial goals may vary, so you can consult with a financial advisor or one of these bitcoin IRA services to get the specifics of what you should do in your own situation.
The main gist of what's going on here with these bitcoin IRA companies is that they are helping you set up a “self directed” IRA (which can still be Roth or Traditional), which means you can hold a bunch of different assets outside the normal scope of what's allowed to be in a normal IRA for normies. A meat-and-potatoes IRA basically only lets you hold cash, stocks, and bonds, while a self-directed IRA allows you to hold real estate, businesses, precious metals, collectibles, and many other things, which now include bitcoin!
Bitcoin-Only IRA Companies
I've listed these two companies first on the list because they are my highest recommend companies for getting bitcoin into your IRA. They are bitcoin-only companies, meaning that they only deal with bitcoin as a digital asset. In fact, they don't even deal with other types of non-digitial assets, as you'll see with some other companies I've listed below, i.e. stocks, real estate, and precious metals.
If you want to just get bitcoin in your IRA, then Unchained Capital and Swan are two main companies you should choose from.
The biggest difference between the two is that when you hold your bitcoin with Unchained, you hold the keys in a multisig setup, meaning you hold 2 of 3 keys, and retain full ownership of your bitcoin. Nobody can move your bitcoin but you.
With Swan, you are keeping your bitcoin with a custodian, currently Prime Trust. This isn't ideal, but compared to self-custody in my opinion, but it's a viable option for many newcoiners afraid of full custody.
Why isn't it ideal? For one, you don't hold the keys to your bitcoin, meaning you can't verify they actually have the bitcoin on the books or that you'll access to it any time you want. Secondly, Prime Trust doesn't currently operate in all states. Lastly, Prime Trust deal with many types of cryptocurrencies, including Ethereum, NFTs, and other low-quality digital “assets”, which raises red flags in my mind.
Unchained really is the top-tier choice for holding your bitcoin in an IRA. They specialize in self custody, and their target customer is those seeking “white glove” treatment for learning how to self custody their bitcoin.
To set up your IRA account is a $995 one time fee, and then a $250 yearly fee.
What's great about Unchained is that you get a very simple portal to view and manage your bitcoin holdings, which includes visual access to your keys that will be used in a multisig setup. Multisig with Unchained is fantastic for newbies in my opinion, because it gives you peace of mind that your bitcoin won't be “lost” while holding onto it for several decades.
Multisig with Unchained is a 2 of 3 setup, where they hold one key, which means you hold two. Any one of the three keys can be lost, corrupted, compromised, etc and you still have two keys which can manage your bitcoin. Since they hold one key, that'll pretty much never be lost, so you just have manage your two keys safely. You can put one in a safe deposit box at the bank or have an attorney store it for you. You can hold the other at home in a safe place.
You also have the option to have them hold two keys if you really don't trust yourself, but it means they control your bitcoin. You still have the benefit of having a third key so you monitor the status of your bitcoin, but without 2 of 3 keys, you lose the benefit of self custody.
Unchained is also on the forefront of inheritance planning, so if you are already thinking about who will get the benefit of your IRA bitcoin savings, then Unchained would be a great company to work with. They'll hop on a video call with you and get you set up!
Swan is a great company, but I'm not too enthused about them using Prime Trust for storing your bitcoin. Prime Trust is a well known, regulated, and widely trusted company in the bitcoin space, but if you are focused on self-sovereign ownership, then storing your bitcoin at a custodian defeats that goal.
I'm also not super happy about the fee structure. Under $100,000 in value and it's pretty much on par with other companies ($200+ per year), but over $100k in value and you're now paying a 0.25% to total asset value, which doesn't seem like much, but will seriously add up if you hold just a few bitcoin and we hit multiple six-figure bitcoin price in the coming decades. Plus, their trade fee is 0.99%, versus Unchained 0.5% fee.
“Crypto” IRA Companies
Below are some companies that specialize in digital asset custody in IRA accounts, but they do not exclusively focus on bitcoin. They may offer a basket of hand-selected crypto assets, such as Bitcoin & Ethereum, or they may offer the option to custody any digital asset you want.
My issue with companies that service multiple types of cryptocurrencies is that they often are outsourcing things to other companies because it's impossible to stay on top of everything happing in the crypto space. There's no way that a single company could offer you top tier in-house custody service for 1,000 different cryptocurrencies at the same time.
What that often means is that you are left on your own to make custody decisions, or there is a deflection of responsibility with regards to who is actually holding your assets.
If you go with the self custody option, that may work, if you are familiar with best security practices for whatever it is you are holding. Are you using a hardware wallet? Do you have multiple hardware wallets? Do you have your private key backed up securely? Do you need wallet backups? Are there any scheduled hard forks that require wallet software/firmware updates? It can get complicated even if you have just 5-10 coins you're serious about.
The complications of self custody for multiple coins means that many companies even recommend keeping your coins on an exchange, which introduces another massive attack vector on your retirement savings. Imagine if one of these companies had a relationship with FTX, BlockFi, or Celsius, all of which are now bankrupt and froze withdrawals!? Plus, you can't verify the coins are actually there. Do the coins exist, or is it just an IOU?
I have no problem with people making individual decisions about what to invest in, and I'm not going to tell people what to do with their money. However, just the fact that these companies are offering non-bitcoin cryptocurrencies to their customers means that I'm skeptical of their incentives and skeptical that they'll be around in 10 or 20 years.
BitcoinIRA is an example of how companies orange wash their product to leverage bitcoin's brand, while making money from the churn of shitcoin trading. Their company and product is literally called Bitcoin IRA, but they offer more than just bitcoin in their app. If a company truly understood the value of owning bitcoin, they wouldn't offer the option to purchase utter garbage like Dogecoin, Shiba Inu, and 60 other “meme coins” which are clearly just a flash in the pan, even to the casual observer of crypto markets.
BitcoinIRA uses BitGo to store your coins, which is a widely used crypto custodian that even El Salvador uses to store the bitcoin that the country owns on its treasury. So that's one good thing about it. Of course, trusted third parties are always a risk, so I always prefer and recommend holding your own keys, but many people don't, so it's important to understand where your bitcoin is held. BitGo is just a different option from Prime Trust, which is another popular and widely used custodian.
Other Crypto IRA Companies
There are a number of other services I discovered in my research for this post that supposedly allow you to buy and trade cryptocurrency in a retirement account, but I did not feature them here for a couple reasons.
For one, this list is supposed to be a “best of” list with ideas of where I think you should go. I don't need to list every single option.
However, mostly I didn't list these companies because they all looked quite similar, and didn't really seem like they knew much about bitcoin as an asset, and that's what I'm all about. Buying and owning bitcoin isn't just about getting big price gains so you can sell it and retire. There's a whole philosophy around why bitcoin exists, what are its advantages, and why it's the only crypto asset worth owning.
A great example is iTrustCapital. Based on their advertising of absolute bottom of the barrel shitcoins and cringe marketing of being a “crypto dad”, I wouldn't give this company my money based on that alone. Despite the fact that they custody your coins with Coinbase, it's just not something I'd recommend to my readers.
If you're going to buy bitcoin to hold in a retirement account, you might as well do it with the best possible company who is going to help you understand the asset you hold. Bitcoin's price action can be very volatile, and if you buy some just to make a bit of money without really having an idea of what bitcoin is all about, you'll likely end up being one of those people who buys high and sells low, while the rest of us keep stacking.
Generic Self Directed IRA Companies
This is a list of companies that'll help you set up your self directed IRA and they offer services to get you set up holding bitcoin in your IRA. Depending on the company, you may be able to hold precious metals, real estate, business assets, and stocks in your IRA as well.
Even though there are no bitcoin-only companies in this list, there's actually a few in here that allow you to self-custody your coins, which is awesome. The first one is the one that I used to set up my Roth 401(k).
I'm actually a customer of Nabers because I'm self employed, and created what's called a Solo Roth 401(k). It's like a Roth IRA but through an employer, and it has higher contribution limits. Although I prefer to work with bitcoin-only companies when possible, but Nabers is my top pick for companies that offered the Solo 401(k) option since they have a very slick onboarding process, are super responsive over emails, send out yearly compliance reminders. I have nothing but good things to say about Nabers as a company.
Normally, I get super frustrated with the technical details of all this tax and compliance jargon, but they were able to get me through the process with minimal frustration, and have been able to answer all my questions over the years (I've been with them 2 or 3 years now).
With Nabers, I'm able to hold my own keys to my bitcoin, which was an absolute must for me. Even though it's not very cypherpunk to hold your bitcoin in a retirement account surveilled by the IRS, at the very least I can hold onto my money instead of trusting a 3rd party custodian.
If you are trying to get bitcoin into a tax advantage account that doesn't fit the cookie cutter systems of the bitcoin-only companies I recommended at the top of this page, then Nabers is a great company to work with IMO.
I realize I'm drawing a hard line when it comes to bitcoin-only companies, so I will go ahead and pick a favorite “crypto company” option for your bitcoin IRA, and that one would be Choice. To be fair, they have a really nice looking app and have a very smooth way of starting, contributing to, maintaining your bitcoin IRA. In terms of ease of use, Choice is a company worth considering.
One of my issues with Choice is the marketing, but maybe it's me just nitpicking. I hate the way they “orange wash” their product. Notice from the screenshot that they say “same bitcoin, less taxes”. From marketing on their front page, they appear to be a bitcoin-only IRA company, but as you dig into the details, it's clear they offer other cryptocurrencies and even stocks.
As mentioned earlier, though it may seem like “more is better”, with bitcoin, it's actually the opposite. Less is better because it allows for focus on security and functionality.
However, it is clear that many bitcoin holders do hold other assets as well, and even if you are a bitcoin maximalist in terms of cryptocurrencies, you may still want to hold stocks in your retirement account. It's nice that Choice offers the ability to hold both under the same roof.
They also give you the option of holding your bitcoin with the Kingdom Trust custodian or holding your own keys, though it'll cost you a setup fee to hold your own keys. You can use your own single sig or multisig setup, or you can onboard though Casa, which is a great company and app (despite them starting to offer Ethereum support this year) for collaborate multisig. With Casa, you'll hold two keys and they hold one: smartphone app (1), hardware wallet (2), Casa (3).
Lots of options here for Choice users.
Other Bitcoin Retirement Account Options
Other than opening up a self directed IRA, there are other ways to own bitcoin in your retirement account.
One option is to simply use a retirement account custodian that offers bitcoin as an option. This may or may not be a choice you can make, per se, since 401(k) plans are run through employers. Right now, Fidelity is the main one doing this, but even then, your company may not give you the option to buy in your plan. Plus, there are limits to how much you can allocate to bitcoin even if it is an option.
That being said, for some people who do have access to a Fidelity 401(k) with bitcoin enabled, this is a cool option, and likely going to be more widely available in the future.
There would be no opinion to self custody in this case, and it's unclear if Fidelity will actually be purchasing bitcoin and holding it in custody or if it will be held at some other custodian, but the plan is still a cool option and easy to automate stacking for retirement.
For all other basic types of retirement accounts, you can also invest in stocks with bitcoin exposure. This would include companies that own bitcoin on their balance sheet, bitcoin miners, or bitcoin ETFs. Because these companies are available on public stock exchanges, you can trade these companies freely and you'll get exposure to bitcoin price action. Just be aware that individual companies come with their own set of risks and they may not track the price of bitcoin sat-for-sat.
Bitcoin In An IRA Account Isn't Very Cypherpunk
There are some folks that make the case that owning bitcoin in an IRA account isn't very cypherpunk. You have to disclose all your bitcoin holdings, and you have to hold them in a regulated, supervised account. You have to ask permission to add or remove bitcoin. At this point, you're not really using bitcoin as a sovereign, digital money. You're just tracking the price of bitcoin.
I disagree with this sentiment, although I get where the people are coming from. It's true, holding bitcoin in an IRA account isn't very cypherpunk. However, the whole point of having permissionless money is that people can do whatever they want with it. With several companies from this list, you can even hold your own keys and verify that your bitcoin actually exists!
Plus, what better way to fight monetary repression and over taxation that using the tax code to your advantage?
And just because you have bitcoin in an IRA doesn't mean you can't have bitcoin in other places as well. You can still own your geographically distributed multisig with conjoined UTXOs A-N-D bitcoin in your IRA. “Diversification” in how you hold your bitcoin holdings could be smart – just be aware that it can get complicated with all kinds of different keys, key locations, and cold storage designs.
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