IRAs and Retirement Accounts
What is a self-directed IRA?
Self-directed IRAs offer the same tax advantages as conventional IRAs. The difference is self-directed IRAs let you invest in a variety of alternative assets historically off-limits for everyday investors—including art, crypto, farmland, startups, and real estate.
How do I open an Alto IRA or CryptoIRA?
Opening an account with Alto is easy. You simply click Sign Up at the top of the page, select either an Alto IRA or CryptoIRA, complete the legally required Know Your Customer (KYC) process, and choose the type of IRA you want to invest with.
What types of IRAs does Alto offer?
You can open a traditional, SEP, or Roth Alto IRA or CryptoIRA.
How can I fund my Alto account?
You can fund your account with cash contributions or via a rollover. Alto makes it easy to roll over funds from an IRA, 401(a), 401(k), 403(b), 457, or TSP account, and we don’t charge fees to transfer money into your account.
Who can set up a traditional IRA?
As long as you’re not 70-1/2 by the end of the year and you—or, if you file a joint return, your spouse—received taxable compensation during the year, you can set up a traditional IRA.
Can I set up multiple IRA accounts with Alto?
Yes! If you would like to set up two different types of IRA accounts with Alto (i.e., traditional and Roth), you will sign up for both accounts using different email addresses. Pro Tip: If opening an account using a Gmail address, you can add “+1” (or any numbers/letters following the “+”) to the end of your Gmail handle (for example: [email protected]). This will allow you to create multiple accounts using a single email address. We’re working on making it so all of your accounts can live under one email address, but we’re not quite finished with this feature yet.
Can I borrow from my IRA?
No. Internal Revenue Code Section 4975 prohibits borrowing from your IRA.
What is the difference between a “standard” IRA and a self-directed IRA?
There is no legal distinction between a conventional IRA and a self-directed IRA. While traditional, Roth, SEP, and other IRAs can all be “self-directed” (meaning you choose what to invest in), most brokerages and custodians don’t allow investments in alternative assets—assets not publicly traded and often illiquid. The Alto IRA gives you the control and flexibility to invest in assets you know and understand.
When can I take IRA distributions?
Save for certain exceptions, in order to reap the full tax advantages of an IRA, you have to wait until you’re 59-1/2 to take distributions (and in the case of a Roth IRA, have had your account for at least five years). For more details, visit IRS.gov.
What are the IRA annual contribution limits?
Total annual contribution limits for individual retirement accounts are set by the IRS. For traditional and Roth self-directed IRAs, the 2022 tax year limit is $6,000 for individuals under 50 years of age, and $7,000 for those over 50 years of age. The IRS increased traditional and Roth contribution limits to $6,500 (and $7,500 for those 50 and older) for 2023. SEP IRA contribution limits are considerably higher but depend on several key factors. More information can be found on the IRS website here.
What is a required minimum distribution (RMD)?
An RMD is the required amount that traditional IRA, and owners and qualified plan participants, must start distributing from their retirement accounts by April 1 following the year that they turn 73. RMD amounts must then be withdrawn every year after. Generally, RMDs apply only to traditional, SEP, and SIMPLE IRAs—not Roth IRAs.
Your RMD is based on your age, your IRA’s previous year account balance, and a “life expectancy factor” that is provided by the IRS. The institution(s) where you hold your account(s) can calculate your RMD. Institutions cannot, however, see IRAs you may hold in other places, so ultimately, it is your responsibility to determine the total RMD for all of your accounts.
NOTE: If you turned 72 on or before December 31, 2022, you will be responsible for taking an RMD from your IRAs.
What are alternative investments?
Alternatives are assets outside the traditional markets (stocks, bonds, mutual funds, etc.). Alternative investments include shares of art, crypto, farmland, private equity, real estate, securitized collectibles, and venture capital, among others.
Why invest in alternative assets with an IRA?
An IRA could be the best way to invest in alternative assets due to their potential for outsized returns.
No matter how much your investment grows, with an IRA, you’ll never pay taxes on gains. You may even be able to avoid taxes altogether. With traditional and SEP IRAs, contributions are tax-deductible and you pay no taxes until you take a distribution. With a Roth IRA, you pay no taxes at all. (Upon eligibility to take distributions.)
Not only that, an IRA gives you access to capital that is otherwise locked in other retirement accounts. This makes an IRA the perfect vehicle for investing in assets with longer time horizons.
Are there any restrictions on investing in alternative assets?
Yes, there are restrictions, but not many. The Internal Revenue Code makes those distinctions. In general, as long as an investor doesn’t purchase life insurance, collectibles, coins, real estate that is designated for personal use, or engage in a prohibited transaction involving a disqualified person (your spouse, direct ancestors, and/or descendants), then an investment is possible.
This still leaves plenty of alternative investment choices. Alto has built tools into its platform to help you avoid prohibited investments, though it’s always wise to consult a tax professional before moving forward with an investment.
What documentation is needed to make an investment?
Part of the reason self-directed IRAs have remained relatively obscure until now is that they used to be quite complicated. Alto was created to take the hassle of burdensome paperwork out of the investment process, so everyone can invest in alternatives using their tax-advantaged IRA funds.
The documents that you need will vary depending upon the type of investment you’re making and the issuer who is setting up the offering. Alto will save you the work of acquiring all of the requisite documents, instead collecting them for you via the issuer, on the Alto dashboard.
Do I need to be an accredited investor to sign up?
Alto supports non-accredited investors as well as accredited investors. Anyone can create an Alto IRA account, though some offerings are open only to accredited investors. This determination is entirely up to the company or investment platform issuing the offering.
Can Alto give me investment advice?
No. Alto is an administrator only and does not act as a financial advisor or provide any investment advice. Further, Alto is not a marketplace where investors sign up to buy shares of a startup they see.
Can I invest in shares of my own company?
No. IRS rules prohibit investing in any company that you or the following relatives own: Your beneficiaries, your spouse, your ascendants, your direct descendants, your direct descendants’ spouses and fiduciaries.
What is the difference between Starter and Pro Plan?
With a Starter Plan, you can invest with our wide variety of alternative investment partners. The Pro Plan allows you to invest with issuers you want to invite to the Alto platform, plus everything available in our Starter Plan too.
Who is eligible to open an Alto CryptoIRA?
Currently, any United States resident (with the exception of anyone located in Hawaii) who is 18 years or older can open an Alto CryptoIRA.
Why buy and sell crypto in an IRA?
No matter how much your investment grows, you’ll never pay taxes on gains in a crypto IRA. You may even be able to avoid taxes altogether. Upon eligibility to take distributions:
- Traditional and SEP IRA distributions are subject to income taxes only.
- Roth crypto IRA qualified distributions are completely tax-free.
Additionally, unlike when you trade crypto outside a tax-advantaged account, doing so within an IRA allows you to avoid the often-tedious process of reporting trades on your taxes each year.
Is Alto’s CryptoIRA safe?
Alto prioritizes industry-leading security measures to keep your CryptoIRA safe. Undirected cash in your Alto CryptoIRA is held in FDIC-insured accounts. To the extent funds are held with our custodian, they are maintained in pooled custodial accounts at one or more banks insured by the FDIC. Digital assets held with our custodian are maintained 1:1 in a combination of hot and cold storage. Our custodian, Coinbase, maintains commercial crime and cyber crime insurance policies, and is a state chartered trust company under the laws of the state of New York, acting as a fiduciary on behalf of Alto CryptoIRA accounts. Additionally, neither Coinbase nor Alto will lend, loan, use, or rehypothecate Alto CryptoIRA assets.
How does Alto CryptoIRA differ from other IRAs?
The Alto CryptoIRA can only hold cash and provides access to buy, sell, and hold cryptocurrencies through the Coinbase exchange. Any other assets (including crypto funds) may be purchased with an Alto IRA.
How much money do I need to invest using the Alto CryptoIRA?
With Alto CryptoIRA, you can invest with as little as $10.
How does the Alto CryptoIRA work with Coinbase?
After funding your Alto CryptoIRA, you can invest in up to 200+ cryptocurrencies through the Coinbase exchange. We maintain enough liquidity in our account to accommodate daily trading volumes, and the remainder we hold in cold storage. Our team also takes care of annual tax reporting and is available to answer any questions you have.
Why can’t investors located in Hawaii open an Alto CryptoIRA?
Since our crypto IRA is integrated with Coinbase, and Coinbase does not offer its services to customers located in Hawaii, we are unable to offer Alto CryptoIRA to you at this time. Get on the waitlist here to receive an update when the Alto CryptoIRA opens up to Hawaii residents.
If I’m located in Hawaii and want to invest in crypto, how can I do this?
You can still open an Alto IRA account and invest in cryptocurrency through partners like Eaglebrook Advisors.
What cryptocurrencies can I trade with Alto CryptoIRA?
Alto CryptoIRA offers access to up to 200+ cryptocurrencies via Coinbase integration.