5. No Capital Gains Taxes
The fifth secret is not as good as the fourth secret, using Roth money to invest in cryptos, but it’s an important secret nonetheless. There are several valid reasons why people don’t convert their retirement money to Roth money. One is that if you make too money, the IRS doesn’t allow you to convert your money into Roth. There’s a cap on how much make to qualify. If you make too much, you can’t do it. (See the IRS.gov website for details.) Most people don’t have to worry about making too much, but they don’t convert their retirement money to Roth because it’s too hard to pay the extra tax now. It’s a bite out of their budget that people don’t want to take.
Yet, even though most people don’t have Roth IRAs, a traditional IRA is still a wonderful way to invest cryptos for two main reasons. One is you don’t have to pay the tax until later, at age 70 and a half. When you pay it later, you’re only required to take out a minimum and that’s usually when you’re in a lower tax bracket. That’s one advantage.
The other advantage is that there are no capital gains inside an IRA. People who trade on the stock market short term – e.g. swing traders or day traders – pay short term capital gains tax, which can take a large bite out of their profits. Even buy-and-hold investors pay capital gains eventually. However, a person who makes profits inside an IRA is not subject to capital gains taxes. The tax you pay, later in life, is an income tax. It doesn’t matter over the years how much profit you made or how frequently you bought and sold. There are no capital gains in a traditional IRA (and certainly not in a Roth IRA).
Let’s review. The first secrets are: 1) a self-directed IRA; 2) a flat rate fee; 3) a checkbook control plan where you to hold the wallet; 4) a Roth IRA or 401k; 5) if you cannot convert your retirement money to Roth, you still gain a lot with a traditional IRA. Those are the five secrets. They are five advantages that many people don’t know about. If you’re not taking advantage of it, why not. With the incredible surge of interest (and profit) via cryptocurrencies, and with the tax-beating strategies of a self-directed IRA/401k, everyone can take advantage of these unique times in the short term and long term and build real wealth that’s either tax-deferred or tax-free.