Buying Crypto in Your IRA (Trading, Staking, & Mining)

Transcript:
(00:00) guess what’s back in the news Matt what is it it’s crypto baby crypto there’s been a lot more interest again in buying and investing in crypto and so yes you can do it with an IRA or 401K we’re going to break it [Music] down welcome everybody to another episode of the direct Hour podcast with your truly Mark ker the amazing Matt Sorensen author of the book the self-directed IR handbook and we are here every week talking about self-directed strategies for your IRA 401K retirement account and guess what’s back in the news Matt what is it it’s
(00:38) crypto baby crypto and it’s not someone going to prison or jail it’s that ETFs are approved and bitcoin’s getting back to you know new highs not record highs but new highs from where it’s been significant gains of course in Bitcoin ethereum’s on the on the same track too so we want to talk about it is there’s been a lot more interest again in buying and investing in crypto and so yes you can do it with an IRA or 401K we’re going to break it down there is $33 trillion in US retirement accounts you don’t just have to buy mutual funds you
(01:07) don’t just have to buy stocks or bonds you can buy real estate small business private funds and crypto cryptocurrency and we’ve been doing it for years helping clients across the country yes and for those of you that are skeptical of cryptocurrency and you’re just listening to the show out of loyalty to us thank you we want it we appreciate that and for some of you that are like looking for breaking news in crypto let’s start big picture for a moment and and bring you into why this is so um pertinent right now and what your
(01:34) options are cuz we’re talking about mining staking buying cryptocurrency the metaverse there’s a lot of moving Parts in that industry and we want to break down some of the strategies that you can employ very easily and quickly and take maybe just 5% of your portfolio and go you know what I’m going to ride the wave uh because we it’s not going away uh a lot of the Bad actors are out of the way um and so the SEC opened the doors M what did what did the SEC do this I know you’re closer to it a little yeah this
(02:01) is like the end of last year the SEC or no this is actually just a few weeks agoo week ago the process started last fall yeah a bunch of yeah well the grayscale trust was the first ETF that came out it wasn’t actually and so they got shut shut down by the SEC and so they sued and they won meanwhile the SEC had all these pending applications from basically Wall Street providers like the black rocks of the world that you know manage everything else out there all the mutual funds and ETFs you can buy them for the stock market and they said we
(02:34) want to do a Bitcoin spot ETF which basically means which not basically which means they will actually own the Bitcoin in the fund itself rather than futures or contracts on it so this is new this came out and so this is kind of legitimizing crypto a little more I think a lot of people are feeling more safe about it wall Street’s getting into it the sec’s approved all these funds and so there’s just been a spark of Interest again in crypto and you know this is still a technology who knows what’s going to happen to it you know I
(03:03) don’t know but um but it’s definitely this blockchain technology and the uses of crypto are still being developed and figured out but there’s been a lot of interest in it I think what is it back the stats used to be 20% of Americans I think owned some form of crypto yep and so we just want to tell people if you want to buy it in a tax advantage way you could do this in a Roth IRA if you’re like hey Bitcoin I think is going to go 10x of what it is I don’t know that it will but I’m just saying if that’s like your thesis that Bitcoin is
(03:32) going to be worth 10 times more than it is today or ethereum or whatever crypto currency we’re talking about you can buy it with your Roth IRA and sell it have it come out totally taxfree at retirement and that the tax savings that could be freaking phenomenal so those retirement Talent dollars can be used that’s what we’re doing every day now I want to say what Matt said in a different way just because sometimes um I mean the most of our listeners resonate with the way I say it but a few of you like the way Matt said it so you
(04:00) know let me talk to the the few the proud the Matt listeners is that what they are another and I want to even get a little more basic an ETF is an exchang traded fund it’s like a mutual fund many of us uh know the term mutual fund ETFs are kind of new players in the game in the last 5 to 10 years so ETF is exchange traded fund and these big hedge fund managers and mutual fund managers have been wanting to own crypto Direct ly in these funds and the SEC is like no we don’t want cryptocurrency in Wall Street we don’t want it traded on Wall
(04:37) Street the NASDAQ anywhere the Dow Jones keep it away well the SEC has finally realized it’s a it’s a worldwide currency many of these cryptocurrencies is blockchain technology has been around forever frankly if banks have been using blockchain technology is just open source in the sense of crypto technology which Wall Street hates they like to have their little hands around everything and control it all and the cryptocurrency has been something they’ve been trying to get their head around and how they can control it and
(05:09) make money on it now they figured out how to make money on it if they can put cryptocurrency in an exchange traded fund and their fund managers can manage it and get a percent and their Traders can make money selling it to their investors now they’re all of a sudden they’re interested so they beged to sec to please approve this strategy SEC last week approved 11 different ETFs Black Rock being the biggest uh and they’ve committed $2 billion to their fund they’re like we’re all in and so as these currencies and these funds get
(05:41) more legitimized we’re going to see more stability and when there’s stability value goes up and so uh we’re starting to see a research on a variety of coins and blockchain salana ethereum Bitcoin all of them are starting to be used more and more widely and so it’s it’s here it’s here to stay yeah yeah so let’s break it down I want to make sure it understands how to do this with an IRA the first thing is and we have lots of podcasts on this of course just how to self-direct your IRA in general but if you’ve got money at a Charles Schwab Ira
(06:12) or a Roth IRA at TDM trade or an old employer 401K at Fidelity you can buy crypto you just can’t do it with that TDM trade Ira okay you could get the ETF maybe but if you want to actually own the crypto in your IRA rather than owning an ETF which those by only Bitcoin right now which Bitcoin is the only one you can get and it is only uh and those do have a 1% fee on most of those so if you buy 100,000 of it you’re paying one ,000 a year to have that so but anyways so you can move your account from Wall Street or the broker dealer
(06:44) your bank credit un wherever your IRA or 41k maybe at to a self-directed IRA at directed Ira no penalty no tax it’s just a trusty to trustee transfer you’re saying you know what maril Lynch I don’t want you to handle my money I want to go over to directed Ira so get my money over there probably the easiest are the crypto accounts yeah and we have What’s called the crypto Ira specifically where we have the Roth IRA traditional IRA Health Savings Account SE Ira all these different account types this coverl education account you can do for your
(07:11) kids if you want to buy crypto for them and so we set those up as What’s called the crypto Ira the reason we do that is you’re going to get a Gemini trading account that is owned by your IRA account Roth IRA Health saving account whatever the account may be but then you get a login and you can go trade and buy so we get the money over here in your IRA we do all the tax reporting and the and the we track that you’ll have your statements but you’re going to actually go trade with Gemini Gemini is you know one of the good ones that’s came out
(07:42) through all the you know you know it’s not ftxs and the voyagers and everything Gemini is like a regulated New York banking you know regulated audited by deoe type place and so that’s why we’ve used them and used them from the very beginning so then you can go in and trade you can trade every day you want you can just buy and hold whatever strategy you have you can go do that and there’s 50 plus different cryptos currencies that you could purchase there simple easy you could open up this account on your phone while you’re
(08:09) listening to this podcast it’s literally that fast and easy and we have a 1 1800 number and live chat to get help on how do I make that transfer and make it happen and you can book a call right on the website that’s just the easiest too you want a dedicated time and talk to one of our experienced CS is book a call yeah this isn’t an infomercial that’s just to show you how easy it is now we get into level two strategies some of you like I want to invest in some more of the alternative coins that are not on the Gemini platform I would like to do
(08:42) maybe some staking maybe I want to do some mining maybe I want to buy some nfts in the comic book space is getting very an art space there’s a lot of nfts these non-fungible tokens uh they’re moving property records to nfts they’re moving title ownership to nfts so we have this digital representation of ownership rather than these filing cabinets of paper in the back of the DMV so there’s this is this is the direction the government and the country is going and so cryptocurrency is really leading that charge but to play in that level
(09:17) two space you’re going to typically set up a regular Roth account at the office here meet with a lawyer and open an LLC that LLC would be owned by your IRA and then the world is unlocked how would you say it differently yeah I love that it’s great that’s you so you the self-directed IRA plus an LLC the reason we’re going to do that is because you’re going to need a wallet attached to the LLC and even some clients just want to buy and hold crypto but they want to hold their keys to use the LLC too you know not not my keys not my crypto type
(09:48) thing you know if you’re like I need the keys in order to really feel okay about this I don’t want them with Gemini or any other third party custodian okay and now this is a little aggressive here pioneering in terms of the the the tax rules have not settled on this but what you could do if you want to and you want to get a consult with one of the lawyers is use the LLC and then you go buy the crypto and you can have a hardware wallet that’s like offline and you have the keys and you’re using it through the
(10:13) LLC so but the LLC you’re going to have a bank account for the LLC the IRA is going to invest the money into the llc’s bank account which is an LLC business checking account and then that LLC can use that money to go purchase the crypto whether it’s from a platform a third party doesn’t matter and you could have a Hardware offline type wallet to store it and give you some real clear steps on this and again the lawyer consultation at our firm so the sister company to direct at Ira is the KQ Law Firm we have 12 lawyers doing consults around the on
(10:44) Zoom with clients around the country every day I just went through this process this last week on the eve of the ETF announcement I was like I gotta buy some so I was in I did this at was I at Taco Bell no I was at Cafe reio I was at Cafe re during my dinner I did this whole process what you do is you’ve got your LLC with the bank account I already had that done that’s going to take you about a week to two generally uh you got to open the account you know open the LLC have your consult get your IRA money moved do d d d DT there’s a few steps
(11:16) not painful and the cost may be well under $1,500 generally uh in the legal fees and opening an account fee maybe 300 bucks or so um 395 3.95 so you’re you’re you’re under two grand to get this whole process set up set up and then there’s no real fees ongoing uh based on the value of the account you can build this thing to millions and your annual fee would still be around 400 bucks and so you the the cost value benefit of you controlling this is incredible so anyway I had my bank account I opened crypto.com account which I had had
(11:51) previously and closed it down uh a year ago when things were getting crazy I was just I just retracted a few of my investments in the crypto space but I re open my crypto.com account right there uh then open up my metamask wallet right there and so I went from bank account to crypto.
(12:11) com directly into metamask then metamask is where a lot of the crypto space feels much more comfortable with these kind of cold and hard storage uh platforms where you’re not relying on the custodian like a gemini or a crypto.com and so boom boom my money was over at metamask I’m buying whatever I want and it’s in the name of my LLC owned by my Roth IRA and so by the time I finished dinner I had deployed I think I’ll be honest I deployed about 10 grand I was like I’m going to I’m going to throw this in I took it out of my other Investments and thought I’m going to
(12:42) give it a shot you know just see what happens I want a little bit of soul I wanted a little bit of ethereum and a little bit of Bitcoin they all have a different game plan and a different uh trajectory uh but that was what I did and it’s that fast and easy yeah yeah and to keep in mind this is not hitting your 1040 when we’re talking about making money on crypto it goes up even if he’s you’re selling it or trading it this is not hitting your tax return this is own by your retirement account all right and if it’s a Roth when you sell
(13:09) it and make gains and you pull this out at 59 a half or later it’s totally taxfree zero taxes on that now that’s again we’re using the LLC now because we wanted the the the keys so to speak you wanted to do other things with it or maybe you want to buy some Al alternative coins that aren’t on let’s say Gemini another thing you may want to do is crypto staking yes now this is again something you’ll need an LLC for and you’re going to be staking from the LLC and using your wallet associated with the LLC now when you’re staking
(13:39) here we want to make sure understands there are different types of staking and the reason that’s important is there can be a tax that can apply to an IRA called ubit which will apply to crypto mining which we’re going to talk about here in a moment but when you’re staking if you’re doing what we would call custodial staking where it’s just some third party you’re sending your crypto to and you’re staking and they’re paying you a return on it that’s going to come back to your retirement account and that money you’re making that return that
(14:05) they’re giving you is not taxable it’s the regular type of investment income that a retirement account gets and retirement accounts are designed to receive investment income right when you sell an asset whether it’s stock crypto or real estate in your IRA and the gain comes to the IRA there’s no taxes right that’s investment income but when a retirement account gets business income it can trigger this tax and so depending on the type of staking you may have different types of tax of a tax outcome so if it’s what we call custodial
(14:34) staking where there’s totally a third party that’s running it the node you’re not involved in it at all in that scenario that income is going into your retirement account no tax now on the other hand if you are going out and you’re buying all the hardware you’re running the staking there’s like nodes and all these things involved I forget you know yeah you know you can tell I’m not not necessarily a tech guy you know yeah but um if you are basically controlling the process of the staking you’re the you’re putting your crypto in
(15:05) but you’re also going on buying the equipment and the gear and you’re running it that is going to cause this ubit tax which is a 37% tax on your retirement account there’s if you really want to do that get conversation with the tax laer there’s some ways we can minimize that with the blocker Corp but just know in the staking world there’s a couple different avenu of why there may be ubit or not yep I love it and this is Cutting Edge stuff you know I mean we have our crypto tax Summit we’ve done uh twice we’ll do it another time soon
(15:31) but um I mean we’re at The Cutting Edge of this and the people from the IRS and all their Professionals in the space and we just like no one was talking about this and figuring this crap out no no so um and if you if that statement and what Matt summarize there obviously unless you’re an expert in this area you’re going to have questions um I had met with the client over the phone just yesterday that was like hey Mark I I need to get an LLC and it was for crypto and I I called back the guy was talking and he was like well I’ll get I’ll just
(16:01) get with the law firm and set up that LLC and then I’ll set up a consult to figure out this staking thing and I go no no no no that’s included when you set up your LLC for your self-directed IRA that whole that experience with the lawyer is all that’s all about helping you decide how to structure it what you’re going to do and and he’s like oh my gosh so that’s all included in my LLC setup yeah with a real lawyer on Zoom not somebody in a cubicle saying they talk to a lawyer on the team this is your lawyer with attorney client
(16:29) privilege helping you establish your entity so you’re going to get the answers to your situation and procedure because they’re always different let’s talk mining I Love mining in fact Matt I was just here logging into my nice hash account and working on that because I’ve I’m crypto mining in my retirement account through an LLC and a blocker Corp through nice has now if anybody’s done mining nice hash is out there as the front leader for the average human being wants to mine and here’s the concept everybody essentially what
(17:02) you’re doing is you have a video card on your laptop or maybe a CPU with three or four video cards or more um some people really invest in this you’ve seen the documentaries with buildings the size of Costco with racks of video card CPUs that’s that’s not me I’ve got a rack with like five five video cards but I can assign my computer I guess is another way of saying it or loan my computer processing speeds and space to nice has by logging on with my CPU and my cards and what they’re doing is verifying transactions that’s what
(17:35) mining is it’s a stupidest word I’d really like to be called verifying it’s not mining it’s verifying so what they’re using is my computer hard drive and video cards to just help act like the back office of Wells Fargos for all the transactions and the ATMs going on it’s the same techn it’s blockchain technology at Wells Fargo Fargo it’s blockchain technology at ethereum it’s just ethereum needs more computers to handle the transaction volume going on and so nice has loans out my space every four hours I get paid
(18:10) money goes back to my Roth IRA I have a blocker Corp I pay 21% tax on it but all the rest of that is taxfree and I’m getting paid in Bitcoin when you get on nice has you’ll see that there’s other ways to do it but that’s what I’m doing and when you’re going to go mining all of our attorneys know how to explain that process and you love it yeah all right so um mining I want to hit the ubit thing on that is so I said blocker so I crossed over it yeah so just keep in mind that that’s where you do want to consult because we might use an LLC but
(18:41) you might actually have two llc’s and this is where it gets complicated so if you’re getting into staking where you’re buying the actual equipment or Hardware running some of the staking versus you’re just giving your crypto to someone else to do that type stuff or you’re doing crypto mining you probably need a two LLC structure we have one LLC that the IRA owns directly that LLC invests into another LLC 100% which we add a cc corporation tax classification to which we call a blocker and the reason we do that is now
(19:10) we get 21% corporate tax federally as opposed to 37% ubit tax and when you push down the profit from the C Corp when you do that to an individual they pay 20% tax but when you do it to an IRA it’s zero so it blocks this ubit tax of 37% in exchange for a 21% corporate tax so you’re saving 16% there by implementing that structure now if you’re just going to you know mine a little bit or do a th000 or $5,000 worth of staking you’re don’t do that structure okay yeah you don’t have enough of an investment where the the
(19:43) returns are and the blocker and all that process and structure which cost you a couple thousand dollars is going to be worth it but there’s a strategy and structure for that so whether you’re buying crypto pretty simple and easy Gemini trading account you don’t need to worry about llc’s um we’ve got that down it’ll cost you a few hundred you’ve got staking or I want to own the crypto and have it in a hardware wallet or offline in cold storage or some of these alternative tokens that’s the LLC custodial staking that’s the LLC staking
(20:12) with where you’re owning the hardware the equipment or running it or mining we’re probably doing this 2 LLC structure depending on how much you’re doing I don’t know that that summary is like I’ve got another way of I’m going to summarize it too that’s already coming to me but let’s get one last player on the table and that’s the nft space so so non-fungible token and can I just say this while you’re getting started sorry it’s like we have how long did we do two days was it one day or two we had a two day crypto tax sum on all
(20:43) this stuff so forgive us we’re trying to give you the update and for those of you that are just kind of getting back into crypto or something the high points on this side yeah and we we’ll uh we’ll be I’m sure we’ll be doing another one this year I can feel it uh we need to set a date for that but the nft te- space is this art piece of collecting nfts and investing in them or maybe creating nfts so now we come to this other two-headed dragon if you want to just buy nfts inside your retirement account you can
(21:14) do that too it’s an investment just like crypto and stocks bonds mutual funds or ETFs remember ETFs and nfts I sometimes get those confused but nfts think of them as digital art they’re again an investment you can do inside your retirement account but some people are out there in the metaverse or different metaverses Upland and others creating nfts uh that have long-term value and when you create nfts you’re back to operational income which could have some ubit consequences so here’s the way I was going to summarize it if you just
(21:51) want to buy and hold you can buy and hold with crypto do some custodial staking that that doesn’t create any operational income and you could uh even buy nfts for Buy and Hold yeah as long as the nfts aren’t Collectibles remember as long as they’re not collectible items like the digital art type type stuff um and they have some utility value too yeah yep and there is and you could buy collectible nfts there’s just a tax for the Collectibles oh no that’s right that’s individually but not in the retirement account correct correct
(22:25) so um and there are utility nfts out there everywhere so this is again what occur in your consultation depending on what your where your interest lies the lawyers will help guide you through the best structure because there’s a lot of wealth to be made here but again if you’re creating nfts if you’re mining if you’re very involved in the staking that’s when we’re going to want this blocker Corp that you’ll learn a lot about it’s a chapter in Matt’s book the self-directed IR handbook and then we’ve got again more podcasts on this in our
(22:58) history uh so think about that too so a lot here what we’re just saying is the industry is still here all these strategies are not new they’re alive and well uh prices are a little down but what’s happened in the last year is the SEC cleaned house we got rid of some Bad actors some custodians that were overleveraged and not properly structured when the price of crypto went down they failed and as usual the cream Rises to the top we now have quality custodians the SEC standing behind a lot of the structure of this and I think
(23:33) we’re going to see some movement and no prediction don’t go out byto because I said that but if you want to place some money in your retirement account we’ve got the structure for you yeah and so and that’s really what we’re good at is helping you figure out how to buy these types of alternative assets whether it’s real estate whether it’s small business a private fund crypto not what ones to buy or when to do it but just how to do it with a retirement account because all wall Street’s given you is the same menu
(23:58) over and over again mutual funds publicly traded stock mutual funds public traded stock oh some ETFs and now we know there is the crypto ETFs out there and this is important topic to talk about so um so that’s the summary there on how to do with an IRA now if you go to directed ira.com we have a special page on crypto we’ve done separate webinars on this there’s sections in the self- directed IA Summits and prior years on this there’s a lot of content we’ve done over the years um on buying crypto with a retirement account so make sure you get
(24:25) over there to get into those other educational um opportunities or pie of content that we have and then book a call to if you want to set up an account or learn kind of your options there if uh this is resonating with you and something you want to do yeah and thank you for listening uh we love our tribe our community we’re trying to build the self-directed community every day helping people open accounts and spread the word with their family friends neighbors um you just can’t compete with Wall Street uh with the Super Bowl
(24:54) commercials uh if it’s not a car commercial it’s some Financial uh brokerage bank that’s got worth billions or trillions that and so this is this is for the people of the people and the self-directed strategy is alive and well those uh we wealthy wealthy people have understood it for years and you can do it too we all need to be aware of these strategies so please continue to listen to the podcast share it with your friends and family give us a five star if you’re loving it we’re not going anywhere and uh we’ll see you next week