With rapidly rising population sizes, and a growing burden on others to support you in times of old age, more and more people are looking for ways to build their own sizeable pension fund. Common alternative methods of saving include buying a secondary small home or even investing in fine wines that appreciate with age. However, the growing popularity and awareness around cryptocurrencies present an altogether different way to accumulate money for retirement.
What are the challenges?
As cryptocurrencies are an evolving market, a very small proportion of individuals and institutions understand how they work enough in order to make them a sound opportunity. For example, holding cryptocurrencies in an Investment Retirement Account (IRA) is only possible if the funds are held by a custodian that is approved by the IRS. Many custodians don’t allow cryptocurrencies to be held in IRAs, making the whole process incredibly difficult.
The way around it
To successfully invest cryptocurrencies into an IRA, you will need to establish what is known as a “Chequebook IRA”. In turn, the custodian who oversees your IRA will only hold one asset, which is a Limited Liability Company which is owned by the IRA itself. As manager of the LLC, it will be your responsibility to deal with any investments made and, of course, this means investing in cryptocurrencies. As all investments are owned by the LLC and not the IRA, you will not need to seek approval from the custodian.
The first steps
This process is, in theory, quite straightforward, though you will need professional assistance when starting out. Finding an IRA custodian with experience in chequebook IRAs is best. When it comes to purchasing the cryptocurrencies themselves, you have a couple of options. You can either buy them directly through private parties, but you will need to make it clear you are purchasing any currency as the manager of your LLC. Alternatively, you could find a cryptocurrency exchange which allows you to set up an account in the name of the LLC directly.
Again, it would be wise to seek more information from experienced financial advisors before taking your first steps.