Digital Investing: Funding a Low Fee Digital IRA

More and more people of all ages are looking at building a diverse retirement portfolio using non traditional assets period one of the most popular non traditional assets at present is the cryptocurrency. Potentially these currencies will appreciate tremendously as they have been doing. So it makes sense to invest in them. Specifically, investing in them through a digital IRA will help to ensure you don’t have to pay a lot of taxes on any games you make.

How to Use a Digital IRA

Because the digital IRA is still reasonably new, it has been quite difficult for people to be able to hold cryptocurrency in them. One of the reasons for that is that the internal revenue code does not allow any direct Holdings. Rather, a custodian must hold any retirement fund, and a custodian has to be either a bank or an approved IRS non bank custodian. What this means in a normal English is that you must find somebody willing and authorised to handle your account.

This is also the first main obstacle. Very few custodians accept cryptocurrencies at present. Those that do usually only accepted through the grayscale Bitcoin investment trust. The problem with that is that investments in the grayscale Bitcoin Investment Trust can only be made by investors who have been accredited by the SEC, which very few people are. Not just that, you don’t actually invest in Bitcoin you invest in a promise of a share in Bitcoin.

Several Options Available

Thankfully, all is not lost. You do not have to rely on some sort of fund in order to keep cryptocurrency in your retirement account. In fact, it is even possible for you to have full control over your private cryptocurrency keys. This is possible through what is known as the checkbook IRA. Through this type of IRA your custodian holds just a single asset. This asset is an LLC and the LLC is owned solely by the IRA. Meanwhile, you manage the LLC even though the IRA owns it in full. Well this is appears complex and difficult, more and more financial and tax advisors understand how it works and will be able to help you set it up. Once set up, it is completely straightforward.

As the manager of the LLC, albeit not the owner, it is your decision to determine how different funds are invested. This also means that you can invest in a cryptocurrency. You do not have to get approval from your custodian because the IRA does not hold the investment, the LLC does. The only thing is that you must stick to the prohibited transaction rules as set out by the IRS. Essentially this means that you cannot invest in life insurance or in collectibles. Cryptocurrencies are classified as personal property and you are allowed to add them to an IRA.

If you want to set up a digital IRA or a cryptocurrency IRA, this is generally the easiest way to do it.