What is a Private Placements IRA?

Have you ever heard of a private placements IRA? If not, here is a quick overview on what a private placements IRA is.

A private placements IRA is a special type of self directed IRA that allows you to invest in companies that do not offer stocks or other public investment vehicles. This includes many small, start up companies as well as private firms, LLCs and many other types of organizations.

Why is this possible? Don’t small companies look to other funding sources in order to raise capital for their day to day operations and needs? The truth is that since the recession, banks and other lending companies have made it hard for small businesses to secure funding. This means that they have had to look outside of the box in order to find the funding they need to survive. This includes small investors like you.

Using your IRA to invest in small companies that aren’t available to other investors means that you have the unique opportunity to realize much greater returns on your investments that if you had invested in traditional vehicles. Plus, you get to be a part of something special. What’s more is that you might be able to get in on the ground floor of another Apple or Google.

You could invest in the next big company BEFORE they go public!

As a holder of a private placements IRA, you have the ability to invest in a wide variety of companies and other vehicles. Some of these include LLCs, LLPs, C Corps, REITs, land trusts, secured and unsecured notes and so much more. The best way to determine whether or not an investment opportunity is something that your private placements IRA is eligible to invest in is to contact the custodian of your account.

Things to consider when investing in entities:

There are some special rules that you have to be aware of. It is important to understand the risks of investing in non-public companies before making the decision to do so with your retirement savings. Here are a few things you should be aware of before opening a private placement IRA.

First, make sure that you know about the company you want to invest in before making your hard earning savings available for loans or investments. Non-public companies are not held to the same financial disclosure rules that publicly traded companies are, meaning that you need to find a way to assess the financial stability and viability of the company in order to understand the potential for growth or loan repayment.

In some cases, a company may not allow you to withdraw your funds for a fixed amount of time. This means that you may end up paying penalties to the IRS if you are close to retirement and will be required to begin taking distributions before the money becomes available.

There are certain tax considerations regarding the earnings you receive on your investments. Make sure that you have a tax professional look at your investment to determine your tax liability before investing.

Of course, there are other considerations you may need to be aware of. Private placement IRAs provide you with a great way to grow your retirement account balance at a much faster rate than traditional investments can.