Nostr

Some 401k's can't be withdrawn early. Many other retirement accounts and HSA's have massive 50+% penalties and taxes to early withdrawal. Many require minimum years before vesting.

Before this year, $MSTR stock was the only way to get #Bitcoin exposure with these accounts without immediately losing half, if withdrawal was even possible.

Easy for folks to say jUsT tAkE tHe HiT when they don't have their own 401ks, HSAs, etc they've been building for decades.

nicodemus 1y ago

Almost no one has been building the same 401k plan for decades. That is dying with the boomers (out of a necessity they created).

This means most people should have 401k funds from prior plans that they’ve left available, IF they haven’t rolled them over to their current plan (in which case, they ought to know better).

For those funds that haven’t been rolled into an active plan, go create a self-directed (this is key) traditional IRA (or, if your tax burden is low enough, a Roth IRA), and roll the funds into that. Then, take said funds, buy corn directly, store corn in cold storage of your choice. Chill.

Anyone with retirement accounts is not likely to stay at their job for very long. When you leave, this is the first thing you do.

Just started a new gig or rolled over prior funds? Most plans allow a partial rollover as well as a rollover of contributions outside of your employer. Use this to do the above with the IRA.

There are even more options if you’re savvy. You just need to put in the work to learn.

Don’t feel like putting in the work? Cool.

We all buy at the price we deserve.

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Discussion

Nate 1y ago

To migrate funds from your self-directed traditional IRA to cold-storage self-custody btc before your 60s incurs heavy penalties and income taxes.

If you are 10+ years into a career where you have been rolling over retirement accounts every time you change jobs, then that can be a substantial penalty.

nicodemus 1y ago

A self directed IRA with assets in cold storage is NOT a distribution. There are zero penalties.

It’s even more open and shut if it’s with a 3rd party involved but you still hold the majority of keys (like Unchained).

Nate 1y ago

Maybe I am misunderstanding you.

A self-directed traditional IRA cannot have assets in cold storage. It is a fiat banking instrument that custodies your assets. To pull any of it out of the bank's custody is a distribution that the bank reports.

nicodemus 1y ago

Banks do not hold assets. Banks are NOT usually the directors of tax advantage accounts. The banks typically hold the *funds* prior to allocation into the tax advantaged account. They have nothing to with this.

Tax advantaged accounts belong to a custodian on behalf of a person - this part you have correct. What you don’t understand is that the custodian can be an entity controlled by the same person who is the contributor to the account. There is no law against this. This entity can take on a myriad of forms, but the easiest is to just set up a trust fund.

The fund has a checking account. The bank controls the checking account. The fund controls the allocation of, management of, and record keeping of the fund. This means that if the fund was investing in barrels of oil or artwork, it would be responsible for the storage, security, and maintenance of those barrels and artwork until it divests from them. There is no difference between an entity storing artwork in some rando warehouse or their garage vs storing corn in cold storage. All that matters is that the entity remains in control over those assets.

If the contributor and the owner of the entity are the same person, it’s irrelevant. They are two distinct “things” in the eyes of the law. In reality, however, you are effectively controlling your keys.

You need to spend some time reading up on how this works, amigo.

Nate 1y ago

Ah ok, you taught me something about trusts. So is it not a distribution for the self-directed trust to spend money before retirement age?

If done via lightning, there would be no way to prove if trust money was spent

nicodemus 1y ago

You’re conflating bitcoin with money in the eyes of the US. They are not the same. Assets can exchange hands as often as a trust trades stock.

A distribution only occurs when the beneficiary of the fiduciary receives dollars (or any legal tender) from the value of assets managed by the fiduciary.

It’s only a taxable event if the dollars (or legal tender) have not yet been taxed as income. Penalties are a different matter altogether and have to do with the reasons behind the distribution as well as age and amount of distribution.

The trust can “spend” funds in any matter it wants so long as it meets the fiduciary responsibilities agreed upon by the beneficiary. If they’re both YOU, this is never a concern.

The only things you can’t do - or are a legal grey area - is have an entity “invest” funds in another entity controlled by the same person.

nicodemus 1y ago

For that last part, your trust can’t invest in your startup without invoking the IRS’ scrutiny.

Nate 1y ago

Oh fuck. I knew I was ignorant but didn't realize I was this stupid.

Thank you kind stranger for the helpful information and patience.

For years I haven't been able to figure out how to convert my retirement accounts to self-custody bitcoin without taking a huge hit.

nicodemus 1y ago

It’s a fair amount of paperwork to get started. But it’s not hard. And it’s totally worth it.

Check out Unchained Capital to help you through the process.

Alternatively, find a good lawyer that deals with estates and trusts.

Your next burden is to figure out how to protect your corn from the state. IE, being sued, seized, or otherwise.

With the keys under your control, you can prevent actively taking the coin. But that’s different than “seizing”, which is a legal term that says it now belongs to someone else. You can work around and avoid a lot of this by how and, most importantly, *where* your trust is created. Jurisdictions are a thing you can exploit.

Bonus points if you start to realize the difference between “controlling” an entity and being the “owner” of an entity. You can create overseas shell companies easily and cheaply that act as the “owner” of an overseas trust. All controlled by you, but legally not owned by you nor in the IS jurisdictions.

Like all security, think in layers.

And, like all villains, the US can and will change the law at their pleasure and your destruction. Plan accordingly.

This begins a long journey for you. It’s a headache, but all LEGAL and with multiple levels of “fuck you” to the government and anyone else who might come after you.

nicodemus 1y ago

What are you on about? There are zero penalties or taxable events for rolling over any amount that is eligible per the plan. Zero. Nada.

All that’s required is that it’s vested and remain in the control of a tax-advantaged account. That account is under SOMEONE’s control. Could be Vanguard OR it could be a trust you set up where you are the director of it.

Educate yourself.

Nate 1y ago

Theres no disagreement with this part.

You are missing my point. Getting USD from your fiat custodian into your btc hardware wallet is a taxable event with heavy penalties. Fact.

Maybe educate yourself

nicodemus 1y ago

Wrong on all counts. A bank account and bitcoin hard wallet have nothing to do with assets managed by a fiduciary of a retirement account.

Saying “fact” doesn’t make it right - you don’t know what you are talking about.