Crypto Education Series: Bonus – Bitcoin FAQ

Reading Time: 5 Minutes

In this 3-part educational series, we’ll discuss bitcoin and other cryptoassets, including background on the exciting new asset class, how your Solo 401k plan can hold crypto compliantly, and the tax advantages of using your Roth Solo 401k plan to grow your gains tax-free.

Our bonus post answers some of the most frequently asked questions about buying bitcoin in your Solo 401k.

Who is eligible to open a Solo 401k plan with Nabers Group (and then buy crypto in the Solo 401k)?

There are two elements to qualify for the Solo 401k:

  1. Presence of self-employment business activity
  2. Absence of full-time W2 employees

In the Information Age, almost anyone can qualify for the Solo 401k. If you don’t already have a small business of your own, consider starting one! You can start a business from home, with almost no time or capital requirement. Nabers Group clients include weekend Uber drivers (who have a full-time “regular” job), stay-at-home-Moms who do some virtual assistant work part-time, all the way to individuals running 8-figure consulting firms…and everything in between.

You’re still able to qualify for the Solo 401k if your business has employees, so long as they are part-time (under 1000 hours per year). Part time employees, nonresident aliens, persons under age 21, and union employees are generally excluded from participating in the Solo 401k plan.

Your spouse is able to be an employee in your business because they fall under a special “owner-employee” exception.

It’s OK for you (and/or your spouse) to have and participate in your own Solo 401k, even if you work a full-time job, and even if you are contributing to your work 401k plan.

What are the benefits of a Solo 401k vs other 401k plans or self-directed IRAs?

  • Roth 401k Account Automatically Included in Nabers Group Solo 401k plan: This gives you the opportunity to grow your wealth tax-free with Roth funds.
  • Maximize contributions: The Solo 401k with Nabers Group allows you to contribute up to $61,000 tax-deductible each year. If your spouse participates in your business and the Solo 401k with you, you are eligible to contribute up to $122,000 tax-deductible.
  • No custodian: With the Solo 401k, there is no custodian or third party administrator because you are your own custodian and administrator. This means you can execute transactions more quickly and for zero transaction fees. While other providers might only give you access to 5-6 crypto assets, representing less than 1% of the coins in the total market, the Nabers Group Solo 401k lets you invest in any crypto asset you want. And, you never have to compromise safety because you can hold your cryptocurrencies yourself in a cold storage hardware wallet offline.
  • Participant loan: Take a personal tax-free loan of up to $50,000 from your 401k funds. This gives you quick access to capital when you need it, acting as a personal line of credit. All loan documents (promissory note, amortization schedule, loan repayment schedule, etc) are automatically included at no extra cost with your Solo 401k with Nabers Group.
  • Simple administration: Our Solo 401k plan gives you everything you need end-to-end to administer your own 401k plan. This gives you the flexibility to invest in what you want, when you want, with no middle man or custodial delays.
  • Control multiple accounts: The Solo 401k by Nabers Group includes 4 accounts in 1 simple platform; a traditional (pre-tax) 401k for you, traditional 401k for your spouse, Roth 401k for you, and Roth 401k for your spouse. Your documents are housed in the proprietary document dashboard developed by the Nabers Group team to be at the cutting edge of retirement plan administrative technology.
  • Optional LLC: The Nabers Group team can form the Special Purpose LLC for you to use with your Solo 401k plan. While the Special Purpose LLC can open crypto exchanges accounts, many Solo 401k accountholders will also use the Special Purpose LLC to invest in other alternative assets, such as real estate, private equity, or tax liens.
  • IRS approval with industry leader: As the first non-custodial solo 401k document provider in marketplace, we began establishing 401k plans in 2006 just after the Pension Protection Act law was passed. Our experience in this industry is unparalleled and we are actively sought out by thought leaders and other companies for our expertise in getting things done.
  • Truly self-directed: Most brokerage house 401k plans have shortcomings in a few areas: 1) they don’t allow participant loans, 2) they don’t allow you to invest in alternative assets, such as cryptocurrency.
  • Ongoing support from true crypto veterans: In a new and volatile market, you deserve the support of true professionals who know how to navigate the space. Shouldn’t your document provider be someone who walks the walk? Nabers Group team members have been investing in crypto since April 2013 and are happy to support you through the process in taking control of your retirement funds.

What are the tax advantages to investing in crypto with a Solo 401k?

When the IRS released notice 2014-21, they determined that cryptocurrencies will be treated like capital assets. In other words, every time you sell a position in crypto, it will be treated as either short or long-term capital gains. Because retirement are able to grow tax-deferred (or tax-free in the case of Roth), when your retirement account buys crypto and exits positions, they are not subject to any capital gains taxes.  This is a huge advantage to holding crypto in retirement account. That special tax-deferred status allows you the ability to do some trading without being exposed to capital gains taxes, and with less of a burden on bookkeeping. There is nothing to report on tax return because the Solo 410k has no tax return.

A note about mining

The IRS has not stated any position on mining and whether that is considered active business activity (subject to Unrelated Business Income Tax, or UBIT), or passive investment activity. Our recommendation at this time is to avoid purchasing mining rigs with retirement funds, in the case they be determined part of an operating business.

What kind of crypto assets can you purchase with the Solo 401k?

Any of the 1575+ cryptocurrencies are available to you through the Solo 401k by Nabers Group:

Why should I use Nabers Group to set up the Solo 401k for crypto?

Have the best of both worlds by working with crypto veterans & Self-Directed Solo 401k industry pioneers. Other providers give you access to 6 coins, representing less than 1% of the coins in the total market.  Don’t miss out on some of the fastest growing digital assets.

With the Solo 401k from Nabers Group, you’ll be able to invest in any of the 1500 crypto assets (and growing). Not only can your own Solo 401k give you access to all available cryptocurrencies, you can also use it in conjunction with cryptocurrency exchanges and any cryptocurrency wallets. This includes hardware wallets for cold storage, such as the Trezor, Ledger S Nano, and more!

Why isn’t everybody I know investing into this right now?

For the same reason most people live in poor health, poor relationships, and poor finances. Most people just don’t have their act together. Success is only for those willing to take action when they see an opportunity. Opportunities are everywhere, they’re not all good, but there are plenty of good ones to take action on, and that’s what we provide.

How Do I Get Started?

Contact a Nabers Group team member today to see if the Solo 401k is right for you. We’re happy to answer your questions about crypto assets and help you put together a plan so you can move forward thoughtfully, efficiently, and in full control of your retirement funds.

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