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Summary

IRS Notice Categorizing Bitcoin As Personal Property

Bitcoin IRA’s huh?  So you’ve decided to take the plunge and invest your hard-earned retirement savings into the new kid on the financial block, Bitcoin.  Well, it’s a little different than other kinds of investments, and today, I’ll show you how to make it happen.  I’m Bryan Ellis.  This is episode #280 of Self-Directed Investor Talk.

 

Transcript

Hello, Self-Directed Investor Nation!  Welcome back to the broadcast of record for savvy, self-directed investors like you where we’re all about making investments that are simple, safe and strong… we’re all about showing respect to our own capital… and building a legacy for the people and causes we love.

And, oh yes… we’re also unabashed capitalists.  Yes indeed!  Hehehehe

Today’s show is brought to you by Self-Directed Investor Society’s latest in-depth article:  Bitcoin IRA Investing:  5 Critical Questions To Ask Yourself First.  This is a great piece of content for those of you considering bitcoin investments in your IRA… much more in-depth that we can do here on the show.  And for now, if you’d like FREE access to that great piece of content, just visit today’s show page at SelfDirected.org/bitcoin and the link will be displayed prominently for you right there at SelfDirected.org/bitcoin.

Ok my friends… to some of you the notion of investing your retirement savings into Bitcoin seems like the OPPOSITE of simple, safe and strong.  It may even seem like the opposite of respecting your capital.

And you know, I can see that argument.  For ME to invest in bitcoin, for example, would not be simple, safe or strong, and it would not be showing respect for my capital.  Why?  I have no expertise, inside knowledge or any other advantage to make me think I could be successful with it.

But out of respect for those of you who know more than I do, and more than most people do, about Bitcoin as an asset class, I share with you today the actions to take so you can actually deploy your IRA or 401k capital into Bitcoin.

As we do that, I encourage your participation in the show today.  You can reach out by phone, email or discussion forum right now and 24/7.  Our toll-free SDI Talk line is 833-SDI-TALK.  Email is feedback@SelfDirected.org.  And of course, today’s discussion is being held at SelfDirected.org/bitcoin.

Ok, investing in bitcoin isn’t an entirely straightforward thing even OUTSIDE of retirement accounts, so it’s a bit more complicated still INSIDE of them.  But it’s still entirely doable.

And I suspect it will be getting easier.  Recently, Fidelity investments – a conventional investment company with over $6 TRILLION in assets – decided to give their clients access to view their Bitcoin holdings through Fidelity accounts, though Fidelity still doesn’t offer the ability to trade Bitcoin.  Still, I think that’s a pretty interesting development if what one seeks is some sort of “normalization” for Bitcoin as an asset class.

Now there have been a couple of attempts to set up ETF’s – exchange traded funds – basically mutual funds that would allow you to invest in Bitcoin through the stock market.  Some of that is available, but in looking at those options, they make me quite nervous.  Those ETF’s suffer from things like very low trading volume – which equates potentially to low liquidity – and from trading at a premium to Bitcoin itself due to high expense ratios.

Again, I’m no expert in Bitcoin… only in connecting it and other alternative assets with your retirement funds… but I’ve got to say that if I was seriously considering a bitcoin investment in my retirement account, I’d likely be inclined to just buy into Bitcoin directly.

So how might you do that?

Pretty easy – 3 simple steps.

Step 1:  Set up the right type of retirement account if you don’t already have one.  How do you know?  Just call up your IRA company and ask them if you can buy Bitcoin in your IRA.  If the answer is no, you need to set up an account with a more flexible custodian, one that is called a “self-directed IRA custodian”.

Fortunately for you, there’s a complimentary listing of practically every such self-directed IRA custodian in America available for you to download on today’s show page (click here).  So pick one of them out, and open an account.

Quick rant:  There’s at least one company – and maybe more – that appears to specialize quite exclusively in Bitcoin IRA’s.  I don’t really recommend that you use closed-end options like that.  My comments aren’t a judgment on that company or the people who operate it.  Rather, I think it’s just a limiting choice that makes your capital less nimble in the future for the inevitable moment when you decide to exit bitcoin in favor of the next great thing.  A better option is, I believe, to open an account with the best self-directed IRA provider you can find that gives you true autonomy and the ability to invest in ALL of those asset types.

Ok, end of rant.

Step 2:  Fund your account.  If you have existing IRA funds you’d like to transfer to cover your bitcoin investment, then transfer those funds to your new self-directed IRA.  Or maybe you choose to make some new deposits into your IRA.  Either way… your call.

Step 3:  Set up a wallet for your IRA.  A wallet is kind of like the bitcoin equivalent of a bank account… it’s just where you hold your bitcoins, which are actually totally electronic and in no way physical.  Choosing a good wallet makes your bitcoins safer against theft or anything of that sort.

Now your IRA company – even if they’re self-directed – might object to allowing you to have a bitcoin wallet that’s established directly in your IRA.  There’s one self-directed IRA custodian I know of who won’t allow their clients to do this on the theory that bitcoin’s built-in privacy protection makes it difficult to establish a clear legal claim for bitcoin accounts, and thus that custodian won’t allow it.

I think that’s the exception rather than the rule.

But even in that case, it’s easy to do it anyway.  All you do is just set up a checkbook IRA in the account, and then set up a bitcoin wallet in the name of the checkbook IRA rather than doing it in the name of the IRA directly.

If that whole checkbook IRA thing left you a little confused… that’s ok.  That’s a big topic to itself.  Fortunately for you, there’s an entire episode of this show that really explains that concept well, so if you need to brush up, just stop by today’s show page at SelfDirected.org/bitcoin and you’ll find a link in the resources section of the page that will tell you everything you need to know, in our characteristically concise and precise manner.

So that’s it, folks… 3 steps… set up a self-directed IRA, fund it, and set up a Bitcoin Wallet within your IRA.  That’s the size of it.  As my 4-year-old son Sam has recently become fond of saying… Easy-peasy-lemon-squeezy!

So what do you think?  Are you investing in Bitcoin in your IRA?  If so, did you do so using the strategy I’ve outlined here, or some other way?  Sound off, my friends, in today’s discussion at SelfDirected.org/bitcoin and while you’re there at SelfDirected.org/bitcoin, be sure to check out our latest in-depth article called Bitcoin IRA Investing:  5 Critical Questions to Ask Yourself First… you’ll be glad you did!

In our next exciting episode, I’ll give you my thoughts on this rather haunting question:  SHOULD you invest your IRA in bitcoin?  The answer is not the same for everybody, and I’ll give you some good objective guidance to make sure that the decision you make treats your capital with respect and is truly simple, safe and strong.

My friends, invest wisely today, and live well forever!

 

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Bryan Ellis

I am host of Self Directed Investor Talk, which I'm told is America's #1 podcast and for affluent self-directed investors. I'm also something of an expert in self-directed IRA's, solo 401k's and 1031 exchanges. You can find more of my writing in some cool places like TheStreet.com, Entrepreneur.com, ThinkRealty and even Forbes (that was always one of my goals!). I live in metro Atlanta, Georgia with my wife and business partner Carole Ellis(she's a real business partner... not just because she's my wife... I'd want to work with her if I wasn't married to her... and I'd want to marry her, too). I also have 4 children ranging in age from 2 to 20 (yes, you read that correctly). It's my goal to be the name everybody thinks of when they think of Self-Directed IRA's and Solo 401(k)'s.