Austin Holloway

How does one go about owning bitcoin (or any other cryptocurrency for that matter) inside of their retirement account? Well it really depends on what your IRA administrator will allow you to do. If you’re with a standard financial firm (traditional investments like stocks and bonds) then you’re pretty much out of luck. If you have a self-directed retirement account that allows for alternative assets, then you do have the ability. Some firms will allow you to simply purchase the investment right on their platform where they will hold the coins in “cold storage” as they refer to it. Although this may seem like the easiest process, what is easy isn’t always what is best. Bitcoin is a much talked about investment for the sheer fact of its volatility. People are buying it at 2:00 and cashing out by 2:05 taking profits, and they need to be able to cash out quickly. Cold storage sounds like an incredibly secure way to hold your investment, but I disagree. Not only are you limited to investing through the exchange the custodian prefers, but your private keys are then known by another person(s) – which is a major risk to the investor. If someone has access to your private key, they have access to send your bitcoin anywhere in the world – without a trace. Many of these custodians will charge you upward of your total investment. Cold storage is simply the process of breaking down your private key and splitting it up into multiple locations – the problem is you no longer have the ability to instantly cash out when you feel the time is right! To learn more about a private key I would suggest reading this wiki link.

To keep your bitcoin secure and accessible at the same time is a slightly more tedious task, but will truly give the investor full control. You may have heard of Checkbook Control, and at its core that is what we will be discussing here. To own bitcoin with your retirement funds you need to setup a single member LLC and operating agreement showing your IRA account as the only member, normally this can be accomplished by using a credible attorney. Once the LLC is setup, open a bank account for that LLC. Then, you simply direct your custodian to send the funds from your individual retirement account to the LLC account. From this point on you’re able to pick the bitcoin exchange and wallet of your choice to use. Larger exchanges will usually link directly to your bank account and you may use the exchange to then purchase the bitcoin. The money is transferred back and forth from the exchange to the LLC account all while being held under the name of IRA account, keeping the funds tax advantaged. The most important aspect of this process is that you are the only person with access to your private keys and you’re no longer surrendering the liquidity of your investment. You now have total control of what you do with your funds.