Bitcoin Retirement Plan

Keep it simple

About a year ago, I wrote a piece on the Bitcoin Retirement Plan. Since that time, I have reflected on that initial thought process and refined the approach, while adapting my own retirement planning to these basic steps. I enjoy the simplicity of the approach and not having to be an “investment expert” with my retirement portfolio anymore, by saving in the best money ever invented. It’s simple math and as long as governments continue to print, borrow and spend fiat currency, Bitcoin will continue to be our best hope against the declining purchasing power of fiat money. You just have to zoom out to see it:

As a refresher, this is why we Bitcoin:

• Absolutely scarce (21M maximum coins)

• Transfers are peer to peer without an intermediary; you can send value to anyone, anywhere in the world with a computer and internet connection

• The Bitcoin network operates independently of all legacy financial systems; it is the first digital global payments infrastructure and digital bearer asset; it is “anti fragile” - also know as “honey badger don’t care”

• No counter party risk when self-custodied

• Trustless; Bitcoin is not controlled by any person or group

• A hedge against fiat currency debasement / collapse in the same way that gold is, but doesn’t have gold’s drawbacks of difficulty to validate, store, transfer and secure - especially in large amounts

So here’s my simple approach to retirement planning with Bitcoin:

Taxable Bitcoin Savings

1. Buy Bitcoin each time you get paid (dollar cost average) - on Strike or a similar Bitcoin only service; if you get an annual bonus, allocate some to Bitcoin

2. Transfer to self-custody cold storage regularly; if you want a “quick start” to self custody, I wrote about this previously:

   Quick Start to Bitcoin Self Custody

3. Repeat

4. Hold

5. Retire

   1. Spend your Bitcoin in retirement and support the circular economy, although this will trigger taxes in jurisdictions that don’t recognize Bitcoin as legal tender (like the US)

   2. Borrow against your Bitcoin if you don’t want to part with your coins or trigger taxes, but not too much - being over-levered can get you rekd

Bitcoin Roth IRA

1. Contribute maximum to a Roth IRA ($6,500 / year or $7,500 if over 50 in 2023) that holds Bitcoin only (check out Unchained Capital, Swan or other Bitcoin only companies who offer similar products - stay away from “crypto” companies that offer shitcoins in their IRA products or offer “yield” - red flag)

2. Keep doing that every year as long as you qualify for a Roth ($138,000 single and $218,000 married income limit before annual contribution starts to phase out) - see below for discussion about the “Backdoor Roth”

3. Hold

4. Retire without paying any taxes on your distributions (see below about government can change the rules on you)

Bitcoin Roth IRA Conversion:

1. Roll over your Traditional IRA or 401(k) into a Bitcoin Roth IRA, get those nasty taxes out of the way (only do this if you can afford to pay the taxes on conversion out of your own funds and not the retirement funds, which you can’t touch)

2. Hold

3. Retire without paying any taxes on your distributions (again, see below about the government can change the rules)

You may ask why I like the Roth IRA so much. Well there are a few reasons:

• Tax-free growth and withdrawals; with Bitcoin’s potential exponential upside, this can save you a lot of money on taxes in the future

• Pass down money tax free to you heirs (in some cases they may need to take distributions over ten years, but because it’s in a Roth the distribution should be tax free; always consult with a tax attorney when doing your estate planning

• You can withdraw contributions penalty free at any time (except when you do a Roth conversion, you have to wait five years before touching the money or there’s a penalty, same with earnings if you withdraw them too early)

• No age limit for contributions

• No required minimum distributions, which is really nice if you have other sources of income and don’t need the money - you can just let it compound in the account

The only disadvantage to a Roth is the income limits, which preclude you from contributing over a certain income level. There is a “back door” Roth option, where you first contribute to a nondeductible traditional IRA and immediately roll over to a Roth (using after tax money and before any earnings accrue) that has no income limit. This loophole was up for elimination last year, but somehow survived with the new Build Back Better legislation. This is a really valuable estate and tax planning tool for those who make more than the Roth contribution income limits and seems like it will be around a while longer.

The other downside to investing in tax advantaged accounts is that the government can always decide to change the rules, as they tried to do with the Build Back Better legislation where they tried to eliminate the backdoor Roth, prohibit anyone making over a certain amount from doing any Roth conversions of pretax savings accounts at all, among a host of other changes that would have made Roth IRAs much less useful. This could certainly happen again if the government is looking to raise more tax dollars, which seems likely if you consider the large and growing Federal debt burden, not to mention rising interest rates. This possibility (and the annual limitation on how much you can contribute to a Roth) is why I think a blend of taxable and tax preferred accounts is smart.

Not financial or legal advice, for entertainment only, do your own homework.  I hope you find this post useful as you chart your personal financial course and Build a Bitcoin Fortress in 2023.  To see all my books on investing and leadership, click here.  

Always remember: freedom, health and positivity!  

Please also check out my Building a Financial Fortress Podcast on YouTube here and on all your favorite streaming platforms. I do a weekly Bitcoin news update every week on current items of interest to the Bitcoin community, usually 30 to 60 minutes depending on the number of topics to cover. Please check it out if you haven’t already.