Private Placements in a Self-Directed Retirement Plan

Published on November 14, 2017

Private Placements are among the many types of nontraditional investments you can include in a self-directed retirement plan. What exactly is a private placement? It’s the sale of non-public securities by a company to a small number of select investors, done to raise capital. In short, it’s private equity investing.

The term “private” distinguishes this investment from public securities available on the open market, since the investment is in a privately-held entity.

Many people with self-directed IRAs make a private placement part of their self-directed retirement portfolio. The investment provides funding for the business owner and the self-directed investor has the potential (no guarantees, of course) to reap a nice, tax-advantaged (or tax free) return on the investment.

Private placements may involve the following:

• Businesses – LLCs, C corporations, limited partnerships, small businesses and early-stage/startup companies
• Funds – pooled investment funds, hedge funds
• Convertible notes – as they can turn into private shares
• Equity crowdfunding

As with all self-directed investments, it is your responsibility as the account holder to conduct due diligence on the investment before including this alternative asset within your plan.  Make sure you understand all the terms laid out by the entity regarding investor sales or withdrawals of funds, how the IRS will treat earnings, and how your particular state regards LLCs vis-à-vis securities.

Once you’ve decided upon the investment and completed your due diligence, Next Generation Trust Company can help you get started. Our Starter Kits walk you through the steps in order to open a new self-directed retirement plan with us; additionally, our team handles full account administration, executes the investment transactions, holds the assets, and provides ongoing guidance and support. Interested in including private placements in a self-directed retirement plan, or just want to learn more? Contact Next Generation at 1-888-857-8058 or Info@NextGenerationTrust.com to be directly connected with a representative.