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For Matthew Roed, Social Security looks a lot less promising than the money he hid in his BitcoinIRA.

Roed is a registered nurse living in Golden Valley, Minnesota, and he says he spent 16,000 hours researching anything related to bitcoin. His conclusion? Investing in cryptocurrency is the key to a good retirement, and the best way to do it is through a self-directed, tax-free individual retirement account, or IRA.

“Since bitcoin is legally classified as owned by the US government and my crypto is inside an IRA, I knew I would significantly reduce my taxable expenses due to exponential growth,” Roed said. .

At today’s prices, the bet is so far successful.

The MBA graduate, father and husband initially invested $ 30,000 in his BitcoinIRA. Right now he says his retirement portfolio is $ 250,000,

Despite being down from its peak of $ 500,000, Roed still feels justified in his belief that bitcoin is the future.

“No one wanted to listen to me at the time, including my own family,” he said. “I became a recluse and used my frustration to push myself more and more into this market.”

RN Matthew Roed at the Courage Kenny Rehabilitation Institute in Golden Valley, Minnesota.

Matthieu roed


BitcoinIRA was launched in May 2016, offering investors the tax benefit of an IRA, as well as the return of a high-risk, high-yield alternative asset class. It is similar in nature to other IRAs, except instead of being funded by gold, cash, and bonds, it is backed by bitcoin.

The company has more than 100,000 individual account holders, including clients as young as 18 years old. But COO Chris Kline told CNBC that 75% of account holders are 45 and over. “It is no longer a game for young children,” he said.

BitcoinIRA doesn’t just deal with bitcoin either. It now includes a long list of cryptocurrencies, including Ethereum and Litecoin.

Campbell Harvey of Duke University thinks diversification is the right solution.

“Having a portfolio exposed … to a single crypto like bitcoin doesn’t make sense, because although bitcoin is the most important right now, its share in the overall crypto capitalization has shrunk over time. . There are so many other chips out there, ”Harvey said.

When CNBC first profiled BitcoinIRA in 2017, it served $ 6 million in transactions for 700 account holders. This month it surpassed $ 1.5 billion in all-time transactions.

There were also significantly fewer players in the crypto retirement space. The market is now flooded with options.

A recent survey of financial advisers shows a significant shift towards cryptocurrencies. 14% of the more than 500 financial advisers included in the report said they now use or recommend cryptocurrency to clients, up from less than 1% in 2019 and 2020.

The IRA Kingdom Trust custodian offers users the opportunity to diversify into 20 different cryptocurrencies. CEO Ryan Radloff told CNBC that $ 2 billion of the $ 17 billion he holds for clients is now in cryptocurrency. This is up from $ 350 million a year ago.

“The number of people interested in including bitcoin in their retirement savings… is growing exponentially,” Radloff said. “People don’t want zombie retirement accounts that only allow you to invest in three target date funds. They want more choice in what they do with their hard-earned money, and they want access to durable assets that will grow in value over a long time horizon. “

IRA vs. Roth IRA vs. 401 (k)

Cryptocurrency-backed retirement portfolios can quickly gain popularity, but there are still some major limitations.

On the one hand, while there are multiple ways to invest your retirement savings – whether it’s an employer sponsored 401 (k) or a Roth IRA – very few of these vehicles actually allow an alternative asset like gold or crypto.

That’s why the primary retirement vehicle for holding crypto is self-directed IRAs, says Shehan Chandrasekera, CPA and head of tax strategy at crypto-tax software company

As the name suggests, it is an account that you open with a custodian, you make all the investment decisions and your income is tax-sheltered until you retire. Kingdom Trust and BitcoinIRA both follow this model.

“When it comes to retirement accounts, right now with bitcoin it’s IRAs, IRAs, IRAs,” said Tyrone Ross, Managing Director of Onramp Invest. Onramp sells software that helps financial advisors track clients’ cryptocurrency investments.

“Because it’s considered property by the IRS… that’s why you see the IRA’s self-managed space blowing up,” Ross continued. “There is a lot of regulation to go through before entering the 401 (k) space.”

There are exceptions. A small 401 (k) provider called ForUsAll announced last month that it now allows participants to allocate up to 5% of their retirement funds in 50 different crypto assets, including Bitcoin, which will be held and managed by Coinbase. .

Companies like BitWage and Digital Asset Investment Management are also trying to integrate crypto into traditional pension plans offered by employers.

But Chandrasekera says that “overall 99% of 401 (k) plans don’t offer bitcoin services,” so there is still some way to go until bitcoin hits traditional retirement platforms.

Fidelity, for example, tells clients that retail brokerage clients cannot buy or sell any cryptocurrency at Fidelity, although they can, in theory, gain exposure to bitcoin trading through companies associated with the. crypto that trade on public markets. Ditto for Charles Schwab.

Learn more about cryptocurrencies from CNBC Pro

Risk of volatility versus tax savings

Roed spoke to CNBC after completing a 2-hour night shift. These after-work hours are when the rehabilitation staff nurse invests the most time in finding ways to invest in cryptocurrencies.

Part of the reason it settled on BitcoinIRA has to do with the company’s staking program. Roed lends his bitcoin to third parties and in return he earns an annual percentage rate, or APR, for the risk. “It’s something like 2% per year,” he said.

This helps offset the annual account fee of $ 240, plus the average transaction fee of 1% to sell and 5.5% to buy.

Kline says customers can earn up to a 6% annual percentage return on cash and cryptocurrency, which helps balance the fees.

Another major consideration? The volatility of bitcoin.

The world’s most popular cryptocurrency is trading at around half its value in April.

“We don’t see this volatility, for example, in the stock market,” Harvey explained.

“It is naive to think that bitcoin is going to continue to rise. There is going to be a certain limit, and people have to think deeply about it,” he said.

Beyond the risks of volatility, the Securities and Exchange Commission has also warned of the risk of fraud when participating in self-directed IRAs that deal in cryptos.

But Kline remains optimistic. He led CNBC through a case study of a client who bought roughly $ 1.5 million worth of bitcoin in April 2020, when the token was trading at around $ 7,335. At today’s value, his investment is worth well over $ 6 million.

BitcoinIRA Case Study

Dated Amount Unit price Total purchased Current unit value Total present value
April 9, 2020 193,295 BTC $ 7,335 $ 1,417,859 32,416 6,265,850

But at the end of the day, Kline says it’s the tax break that makes BitcoinIRA a slam dunk for those looking to trade cryptos.

If a taxpayer with an average income sold their bitcoin today, they would not pay any tax for the crypto held in their BitcoinIRA. If it was a Coinbase account, that same person would be subject to a 22% short-term capital gains tax or 15% for long-term holding.

“Quite clear enough quantitative reasoning to put an asset like bitcoin into an IRA framework,” Kline said.

CORRECTION: This article has been updated to show RN Matthew Roed spent 16,000 hours researching cryptocurrencies, not 160,000 hours. In addition, it clarifies that 75% of BitcoinIRA account holders are aged 45 and over.