iTrustCapital says it is offering a new type of platform where users can easily set up an individual retirement account, fund it and use it to begin trading cryptocurrencies — with precious metals to be added soon. This provides a “safe, affordable, and efficient alternative” to existing Self-Directed IRAs, all while keeping the client in full IRS compliance.
The shortcomings of Self-Directed IRAs
Currently, the majority of American’s investment money goes into retirement accounts. However, the products offered by the biggest names in traditional finance don’t allow for any exposure to alternative assets like cryptocurrencies or precious metals. This limits an individual’s options for hedging against bad economic conditions or taking advantage of the potentially huge tax savings for assets with historically high returns, such as cryptocurrency.
Some have used Self-Directed IRAs to open up more flexible accounts, but these can be both complicated and risky for the client. It can be hard to find a custodian that will work with the type of assets you want exposure to — and often, setting up the account is a fairly technical process. On top of that, staying in line with IRS regulations falls explicitly on the user, and it can be easy for the inexperienced to make mistakes. It doesn’t help that a lack of clarity over digital asset regulation could lead to even well-intentioned individuals winding up outside of the law. Because of this, Self-Directed IRAs are usually only recommended to professionals and others with deep knowledge of financial instruments.
"Most Americans have the majority of their wealth in retirement assets, so it's hard to make a meaningful investment without access to those funds. Also, it's hard to build wealth when you're paying taxes every year, on every trade," according to Blake Skadron, iTrust's chief operations officer.
This is where iTrustCapital comes in with a solution that has many of the benefits of Self-Directed IRAs but none of the limitations, hassles or risks, the company notes. All this while giving their clients exposure to some of the most popular cryptocurrencies in circulation — and coming soon, precious metals and other alternative asset classes. Currently, the platform supports trading Bitcoin, Ether, Litecoin, Bitcoin Cash, XRP and EOS.
Users can set up an account and apply for a new IRA in minutes, with professional support staff available via phone, live chat or email to answer questions. The new account can be easily funded by an existing IRA, 401(K), 403(B), thrift savings plan, 457 or even with a cash contribution. If users have cryptocurrency in an existing IRA, they can transfer the assets without paying transaction fees.
Once funded, users can begin trading 24/7 with any of the supported assets. One of the benefits of this is that all trades are sheltered from taxes, as gains made in a Roth IRA are tax-free, given that no funds are taken out of the account until the age of 59 1/2. This means users can actively manage their portfolio without the complications that come with every transaction being a taxable event.
In order to keep all clients effortlessly inside IRS compliance, iTrustCapital deploys a system of reporting features and plans to employ blockchain technology like smart contracts to enable investments involving more complicated transactions like real estate, the team says. This removes the need for extensive experience and opens the door to most of the regular population.
To further put client’s minds at ease, the company offers complete custodial service backed by Curv, an institutional cloud-based wallet protocol that claims to eliminate the critical points of failure with cold storage based on private keys. This means all of the account's assets are not only safe from hackers but also human error, taking a large element of risk out of cryptocurrency trading.
One last issue with traditional retirement savings vehicles is high costs. Often there can be as much as a 15%–30% transaction fee when trading in an IRA. Currently, iTrustCapital is able to offer trading fees of just 1%, and is working to get this number lower. This all comes at a flat rate of $29.95 per month account fee.
Motivation for the team
The team is motivated by the fact that more people would expose their retirement accounts to increasingly diverse assets, such as cryptocurrencies and precious metals, if only accessible and affordable options were available. By working to “improve the user experience, provide more liquidity, and offer reliable security,” iTrustCapital sees a future in which people will have more control over how their money is managed. Tim Shaler, an economist and advisor at the firm, believes that in the coming years, this model will bring in a significant amount of new capital into the market:
“We predict technology, including blockchain, will create a new segment that, in addition to access to retirement capital, will inspire new uses for tax-advantaged accounts. We expect, with mass-adoption, to see $1.5T of capital moving into this new asset class within seven years.”
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