IRA Basics

A simple guide to how retirement accounts work — and how a self-directed IRA lets you use DeFi inside a tax-advantaged structure.

The Difference Between Using an IRA and Not Using One

DeFi creates constant taxable events — swaps, LPing, staking, rebalancing. In a normal wallet, those gains are taxed each year as income or short-term capital gains, which drags down compounding over decades.

Example: 30 years of the same DeFi strategy

  • Starting capital: $50,000
  • Strategy return (before taxes): 10% per year
  • Short-term tax rate on gains (outside an IRA): 35%
  • Time horizon: 30 years (e.g. age 35 → 65)

Without an IRA (taxed each year): your $50,000 grows to roughly $330,000.

Inside an IRA (no annual tax drag): the same strategy grows to roughly $870,000.

≈ $540,000 more — just by running the same strategy inside a tax-advantaged IRA instead of a taxable wallet.

Numbers simplified for illustration only; assumptions may not reflect your situation. Crypto and DeFi are risky, and past performance is not indicative of future results. This is not tax or investment advice — talk to a professional about your specific case.

What Is an IRA (and why does it matter?)

An IRA is a tax-advantaged retirement account in the U.S. designed to help you invest for the long term.

There are two primary types of IRAs:

  • Traditional IRA — contribute pre-tax, grow tax-deferred, pay taxes on withdrawals later.
  • Roth IRA — contribute post-tax, grow tax-free, withdraw tax-free in retirement.

Roth vs Traditional IRAs — Quick Comparison

Roth IRA

  • Pay taxes now (post-tax contributions)
  • Growth and withdrawals in retirement are 100% tax-free
  • Best if you expect to be in a higher tax bracket later
  • Income limits apply for eligibility
  • Withdraw contributions anytime (earnings still restricted)

Traditional IRA

  • Pay taxes later (pre-tax or tax-deductible contributions)
  • Growth is tax-deferred, withdrawals taxed as income
  • Best if you want to lower taxable income today
  • No income limits to contribute
  • Required minimum distributions (RMDs) at retirement age

IRS Contribution Rules (Simplified)

  • Annual limit: $7,000 (or $8,000 if 50+).
  • Income limits apply for Roth IRAs.
  • Withdrawals before age 59½ may incur taxes and penalties.
  • Qualified Roth withdrawals are tax-free.

What Can You Invest In?

Traditional brokerages limit you to stocks and funds. Self-directed IRAs allow alternative assets such as crypto, real estate, private companies, and more.

Athenic builds on this by providing a compliant IRA structure specifically for DeFi users.

What You Can't Do (IRS Rules)

  • No personal benefit.
  • No self-dealing with yourself, your spouse, parents, grandparents, children, grandchildren, or entities you control.
  • No mixing personal wallets with IRA wallets.
  • No personal use of assets owned by the IRA.

Why Use a Crypto or DeFi IRA?

  • Tax-free or tax-deferred growth of DeFi activity.
  • No taxable events for trades inside the IRA wrapper.
  • Long-term compound growth without tax drag.

Why Most DeFi Users Haven't Used IRAs

Traditional custodians aren't built for crypto. They don't support self-custody, have outdated interfaces, require manual paperwork, and charge high fees.

Athenic solves these problems with modern onboarding, multi-chain support, compliant self-custody, and flat pricing.

Disclaimer: Athenic does not provide investment, tax, or legal advice. Consult qualified professionals. Self-directed IRAs require strict compliance with IRS rules.