Investing in Bitcoin and cryptocurrencies is one of the hottest topics on the internet. There's probably no investment more volatile than Bitcoin or cryptocurrencies. As with any investment, whether it's saving for retirement or not, it's recommended that you complete due diligence and thoroughly investigate the entities you're dealing with. This is especially true when it comes to Bitcoin or cryptocurrency. The cryptocurrency market is as speculative as it gets so it can't be said enough – do your homework!
Having read the disclaimer, it's also apparent that there's a financial revolution taking place right now. Bitcoin's surge in value has led to many headlines and several varied opinions. Let's take a look at what the fuss is all about and see if it can help you save for your dream retirement.
What is Bitcoin/Crypto?
Bitcoin is a form of digital or virtual currency that uses encryption technology to keep track of the units of currency and verify transfer of coins. Further, Bitcoin is decentralized as it operates independently of a central bank. Instead of an actual coin, when you purchase a cryptocurrency, you're given a set of keys that are necessary to access and transfer funds.
History of Bitcoin
Bitcoin was created in 2009 by a person named Satoshi Nakamoto (or was it?). Using open source code and blockchain encryption technology, Nakamoto developed a way to securely transfer funds without the oversight of a government or intervening bank. What started as a forum discussion grew into "the new gold."
Why People are Investing in Bitcoin
There's a lot to be considered when trying to define cryptocurrencies, but the main thing to remember is that, similar to gold, cryptos are viewed by many people as a store of value. Just as prison inmates trade cigarettes and schoolchildren barter with food at lunchtime, many things can have value. In 2016, the value of a Bitcoin was $800, but on November 8, 2017 it reached $7,882 with a market cap of over $100 billion!
How to Save Bitcoin for Retirement
The IRS considers Bitcoin as property and not currency. As such, investors are taxed on their capital gains. By using an IRA to invest in Bitcoin, you don't have to pay taxes on capital gains. If you use a traditional IRA, you'll be taxed when your funds are distributed. With a Roth IRA, gains and qualified distributions are tax-free.
By placing your IRA in an LLC, you can name yourself as manager and transfer funds to a local bank account. Often referred to as a checkbook IRA, you can use this account to register with an exchange to purchase whatever cryptocurrency you desire.
There are several IRS rules and regulations that must be complied with when using a self-directed IRA. IRAYourWay.com was founded to help step you through the entire process and we'll assist you with all the necessary forms when the time comes.
To learn more about using a Self-Directed IRA LLC to make Bitcoin and other alternative investments without tax, please contact John Holder at 606-887-9271 for a free consultation. You can also check out our handy infographic below!