Choice IRA by Kingdom Trust has burst onto the crypto scene with a low-fee, self-directed IRA. In this Choice IRA review, we’ll go over the basics of the account, explain the details of how it works, outline why Choice is able to offer such a low-cost option and much more.
6 Things to Know About Choice IRA Before Signing Up
- You can roll over an existing IRA or fund an IRA from scratch, keeping in mind that there are both income and contribution limits for IRA accounts.
- You can invest in both traditional and alternative asset classes with Choice IRA. For traditional assets, like stocks and ETFs, you’ll place trades through Interactive Brokers. Cryptocurrencies are traded through Kraken.
- Buying crypto costs up to 1.26%. In the traditional investment world this would be considered astronomical, but it’s well below average when it comes to crypto IRAs.
- You cannot earn interest on your crypto. This is a feature that’s anticipated, but had yet to be released.
- The no-annual-fee “In Motion” plan is not covered by Kingdom Trust insurance. This is a reason to go with one of the higher-priced plans, which incur a 1% annual fee for enhanced security.
- If you’re on the free plan, Choice makes money by lending out your digital assets. This is a standard practice among the largest crypto exchanges, such as BlockFi. If you’re not comfortable with the risks associated with that practice, you have the option of holding your private keys.
Choice IRA: Company Overview
Normal IRAs — i.e., those issued by major financial institutions like Vanguard — generally exclude alternative asset classes and limit you to investing in traditional assets like stocks, bonds, cash and mutual funds. With a self-directed IRA from Choice, you can branch into alternative investments like cryptocurrencies.
Since their inception a little more than a decade ago, cryptocurrencies have proven to be a volatile asset class. So at first, it seems like they would be a poor choice for a retirement account. However, that volatility has the potential to run to the upside, potentially generating huge returns over time.
As long as the rest of your portfolio is properly allocated, including cryptocurrency may offer an opportunity to capitalize on significant price movements without risking the rest of your retirement savings.
Note: My personal rule is that no more than 10% of my investable assets can be in risky assets, including individual stocks.
You get the same tax benefits as an SDIRA as with traditional IRA: contributions are tax-deductible and withdrawals during retirement are taxed as ordinary income. You can also open a Roth SDIRA, where you contribute after-tax dollars. However, with this type of account, qualified withdrawals in retirement are tax-free.
IRAs do have both income limits (which vary depending on your tax filing status, but start at $139,000 for single tax filers) and contribution limits ($6,000 if you’re under 50). You can learn more about the benefits and drawbacks of different account types in my guide to the difference between Roth and traditional IRAs.
Note: When investing in risky assets within my retirement, my preference is a Roth account, because it will allow me to avoid a huge tax bill should those assets surge in value.
Choice IRAs are Administered by Kingdom Trust
Kingdom Trust is a financial asset custodian that specializes in providing custody for alternative assets such as cryptocurrencies and precious metals. This means they hold on to these alternative assets for safekeeping on behalf of investors. They are a “qualified custodian” as defined by the SEC.
At the time of publication, Kingdom Trust’s CEO is Ryan Radloff. Radloff co-founded and was CEO of Choice Holdings before leaving for Kingdom Trust. Radloff also co-founded and led CoinShares, a digital asset investment strategy firm.
After Radloff joined Kingdom Trust, the firm acquired Choice Holdings in 2020. Immediately after doing so, Kingdom Trust launched the Choice platform to allow retirees and retirement savers to hold crypto in tax-advantaged retirement accounts.
Also in 2020, Choice started partnering with one of the largest crypto influencers, Anthony Pompliano, sponsoring his influential business and investing podcast.
How Choice IRAs Work
Choice IRAs can include a mix of traditional assets and alternative investments, such as ETFs, cryptocurrencies, precious metals and stocks.
Cryptocurrency trading occurs through Kraken. This means you can trade any cryptocurrency that Kraken makes available.
Currently, Kranen has over 50 cryptocurrencies available to buy and trade, including:
- Bitcoin Cash
Setting Up an Account with Choice IRA
It took me 15 minutes from start to finish to open an account with Choice (without making a deposit).
Once you enter your email and create a password, you’ll be asked to enable two-factor authentication. Then, you’ll need to enter basic contact information, your Social Security number and your driver’s license number, and upload a picture of your license.
Once you’re finished setting up your account, you’ll get access to your investment dashboard.
There are two options for getting funds into your account: You can make a direct cash contribution or roll over an existing IRA or 401(k).
Choice IRAs Fees
Every Choice IRA plan charges a 1% fee on digital asset trades, with no fees for trading traditional assets. In addition to that 1% digital asset trading fee, Kraken charges up to .26% (depending on the cryptocurrency, volume, and order type you place).
In other words, expect to pay up to 1.26% to execute trades for digital assets.
Traditional asset trades, such as individual stocks, are executed through Interactive Brokers. Choice does not charge fees when you trade assets through that platform, but you will pay a very small fee to Interactive Brokers of $0.005/share with a $1 minimum per trade.
More pricing and fee information can be found in the Choice IRA Pricing section below.
Choice IRA Support
Once you’re logged in to your Choice account, you’ll have access to their chatbot. I was disappointed that when asking a question the bot couldn’t answer, I was told that the wait period to get a response was estimated at between three and five days.
There’s also no contact number listed on Choice’s main website (or inside the customer portal).
On the positive side, when I sent an email to [email protected], I received a very in-depth response within two hours.
Choice IRA Account Types
Choice lets you open a self-directed traditional or Roth IRA.
A traditional IRA lets you deduct contributions from your taxes. The Roth does not, but withdrawals in retirement are tax-free.
Choice IRA Pricing
Choice offers three subscription tiers for IRA clients, which are categorized by how you’d prefer to store your digital assets.
- No Annual Fee: Your digital assets are “in motion,” which means Choice lends them out to earn money (for itself).
- Cold Storage: Your digital assets are more securely stored with Fidelity Digital Assets.
- Hold Your Keys: You hold your own digital assets using multi-signature cold storage solution powered by Casa.
Here are the features and benefits of each plan:
|No Annual Fee||Cold Storage||Hold Your Keys|
|Annual account fee||$0||$0||N/A|
|Traditional asset custody||$0||$0||$0|
|Traditional asset trading fee by Choice||$0||$0||$0|
|Interactive Broker’s fee||$0.005 per share ($1 minimum).||$0.005 per share ($1 minimum).||$0.005 per share ($1 minimum).|
|Digital asset custody||$0||1% per year.||$500 in the first year, then $245 per year.|
|Digital asset trading||Up to 1.26%||Up to 1.26%||Up to 1.26%|
|Bitcoin location||Bitcoin is in motion.||Choice’s cold storage.||Your personal cold storage.|
These fees are good compared to other crypto IRAs. As you’ll see below, the alternatives tend to be much higher.
Choice IRA by Kingdom Trust vs. Bitcoin IRA
Choice IRA’s low fees are what distinguishes it from BitcoinIRA, the most well-known alternative.
For starters, BitcoinIRA charges an up-front 12.5% fee to move assets into an account and minimums start at $3,000. This includes both cash and rollovers.
That fee decreases to 10% if you’re transferring over $50,000, and to 7.5% when transferring over $100,000.
Plus, any additional buy orders (after the initial fee) is 5%. And then on top of that, there’s also a 1% fee for sell orders on the platform.
Those fees are astronomical and a deal-killer for me.
One upside of BitcoinIRA is that they do allow you to earn interest on your holdings, which can help offset these fees. Currently, you can earn 6% on cash, 2.7% on Ethereum, and 2% on Bitcoin. The minimum to join their interest-earning program is $10,000.
Choice IRA by Kingdom Trust vs. RocketDollar
Rocket Dollar, another large self-directed IRA custodian that helps you invest crypto inside of a retirement plan, operates its plans differently than Choice.
With RocketDollar you must first set up an LLC. Your IRA LLC then holds your assets.
The benefit of this arrangement is that you can invest in anything on any platform (as long as the IRS doesn’t outlaw it). That opens up the option to have alternatives like private equity deals and commodities like timber, as there’s surprisingly very little the IRS says you can’t invest in.
There’s a one-time $360 set-up fee, as well as a $15 per month maintenance fee.
Where Is Your Bitcoin Held?
With Choice IRA, Bitcoin custody depends on the plan you choose.
The No Annual Fee plan puts your Bitcoin “in motion.” This means Choice lends your assets to other institutions, similar to how a bank lends out your deposits to make money.
The Cold Storage plan puts your Bitcoin into (as the name suggests) “cold storage.” This means that your Bitcoin is entirely offline and not accessible from the internet in any way. This makes it extremely difficult for cybercriminals to try and steal your assets.
In practice, cold storage means storing your cryptocurrency in a paper wallet or hardware wallet. Neither of these is connected to the internet. You can learn more about how cold storage works here.
The Hold Your Keys plan lets you store your Bitcoin in your own cold storage. That means you can get your own paper or hardware wallet and keep your digital retirement assets wherever you’d like.
Pros and Cons of a Self-Directed IRA
Regular IRAs — both traditional and Roth — are known for offering more investment flexibility than employer-sponsored plans like 401(k)s. However, IRAs generally limit you to traditional types of investments, such as stocks, bonds, mutual funds and ETFs.
Self-directed IRAs — which come in both traditional and Roth formats — expand your options by letting you choose alternative investments such as precious metals, real estate, private stock, and now cryptocurrency.
- More control: SDIRAs expand your investment options to include many unique types of investments.
- More retirement diversification: Retirees and those soon to be there may want additional diversification if their main retirement investments see volatility. SDIRAs let them expand into other investment types to possibly hedge against downturns in their regular retirement accounts.
- Tax benefits: SDIRAs can offer the same tax-deferred or tax-free benefits as traditional or Roth IRAs. Thus, if you can make large gains on crypto investments, you could potentially add a healthy amount to your tax-advantaged retirement savings.
- Riskier investments: Alternative investments like cryptocurrency tend to offer higher reward potential, but also higher risk — both in terms of price movements and liquidity. Additionally, SDIRA custodians generally aren’t responsible for investigating an alternative investment’s legitimacy or quality.
- Complexity: Many rules surrounding IRAs are easier to break with a traditional IRA. For instance, you can’t buy a property for personal use in an SDIRA. If you buy a rental property and you or any of your relatives spend a night in it, you might face tax consequences. You may also have to funnel your income and expenses associated with the property through the IRA.
- Additional fees: Some investments may come with additional fees that more mainstream investments don’t have. For example, if you buy gold in an SDIRA, you may need to pay for its storage and insurance.
Choice IRA Review Summary
Overall, Choice IRA can be a good option for retirement investors looking to diversify their holdings and potentially add to their savings with the large gains some crypto traders see.
The company stands out with its low fees, and gives customers the ability to pay a reasonable fee for a more secure storage solution.
As we’ve seen, cryptocurrency tends to be volatile. Make sure you evaluate how cryptocurrency could play a role in your overall retirement strategy.