Retirement investing used to mean picking between stale index funds, overpriced mutual funds or praying your target date fund didn’t flatline. But what if you could use that same 401(k) or IRA to invest in a business you believe in or better yet, your own?
It’s called self-directed retirement investing.
With platforms like IRA Financial, you’re no longer chained to Wall Street’s limited menu of stocks and bonds. You can take control and use a Self-Directed IRA, Solo 401(k), or ROBS, Rollover for Business Startups, for business investing, funding startups, small businesses or even launching your venture – all with the same tax advantages you’d expect from a traditional retirement plan. The ROBS structure is an IRS-approved strategy that allows you to use existing retirement funds to start a new business, or fund an existing one, that you control.
Self-Directed Retirement Investing: What Is It?
Most retirement accounts are locked into a narrow set of investments. That’s by design, your average brokerage wants you trading things they profit from. But a Self-Directed IRA or Solo 401(k) opens the gates to a broader world of alternative retirement investments like private placements, real estate, startups and more.
IRA Financial makes this process streamlined, secure and mobile-first. Whether you want to invest in the next tech unicorn or fuel your own business idea, you can do it all through an app or online platform. No more waiting for a custodian to approve your every move. You’re in control.
How to Use Retirement Funds for Private Business Investments
You can legally and safely use retirement funds for private business investments. Here’s how it works:
- Set up a Self-Directed IRA or Solo 401(k) with IRA Financial.
- Fund the account by rolling over your existing retirement plan or contributing directly.
- Open your dedicated IRA checking account through IRA Financial and Capital One, no bank branch visits or red tape required.
- Use the funds to invest in private businesses, startups or your company.
- Manage your investments directly from your mobile device.
And the best part? All income and gains flow back into your retirement account tax-deferred (or tax-free with a Roth). That means you’re building your future wealth while backing real businesses you care about.
Why Invest in Private Businesses or Startups?
Most people don’t get rich off index funds alone. That’s where private placements come in.
A private placement is a term for investing in a company that isn’t publicly traded. Instead of being open to anyone with a brokerage account, these deals are offered to a select group, often accredited investors, and they tend to come with higher potential returns (and yes, a bit more risk).
Some of the perks:
- Higher returns: Startups and small businesses can scale quickly.
- Diversification: Move beyond the S&P 500 and into real assets.
- Control: Especially if it’s your own business. you’re not just investing, you’re building.
And thanks to Regulation D of the Securities Act of 1933, companies can raise funds without the burden of registering with the SEC. That’s less overhead for the business and faster action for the investor – you.
Most Popular Private Placement Investments
Here’s what IRA Financial clients are doing with their self-directed accounts:
- Funding their own startups
- Investing in pre-IPO unicorns
- Crowdfunding into early-stage companies
- Taking equity in small-cap businesses
- Partnering with other investors on private equity deals
The IRA Financial Advantage
Traditional custodians won’t let you touch this stuff. That’s because banks and brokerages make money selling their products, not giving you access to outside investments. That’s why most won’t let you use your retirement funds for cash-generating private businesses.
IRA Financial believes in flipping that model on its head. Their platform allows you to:
- Invest directly from your phone or PC
- Open and manage a Checkbook IRA or Solo 401(k)
- Skip the middlemen and wire funds immediately
- Get help from assigned specialists every step of the way
It’s built for flexibility, speed and freedom. AKA, everything traditional retirement accounts are not.
What’s an Accredited Investor Anyway?
Some private placements are only open to accredited investors, people or entities who meet certain income or net worth thresholds.
To qualify as an individual, you typically need:
- $200,000+ annual income (or $300,000 with a spouse) for the last two years, or
- Net worth exceeding $1 million, excluding your primary residence
Entities like banks, trusts and businesses with $5 million+ in assets also qualify.
Understanding UBTI and UDFI (Without Falling Asleep)
You knew there had to be some fine print, right?
Most self-directed retirement investments are tax-deferred or tax-free. But there are two exceptions to keep an eye on:
Both can trigger a tax rate up to 37%. The good news? IRA Financial helps you understand and minimize this risk and in many cases, avoid it altogether.
If you want to sidestep these taxes, a Solo 401(k) might be your best bet. It’s exempt from UDFI on real estate and can be structured for maximum efficiency.
Solo 401(k) for Startup Investing: The Power Play
If you’re self-employed or a small business owner, the Solo 401(k) is a powerhouse for startup and business investing. It offers:
- High contribution limits ($23,500 or 100% of compensation, whichever is less)
- No custodian delays
- Exemption from UDFI tax for real estate
It’s tailor-made for entrepreneurs and investors who want full control and aren’t afraid to bet on their vision.
So, Can You Really Start a Business with Your Retirement Funds?
Yes. And you can do it without breaking IRS rules as long as you follow the guidelines and avoid investing in “disqualified persons” (i.e., you can’t pay yourself a salary from the investment, but you can grow equity). That’s why working with a platform like IRA Financial is so key, they help you stay compliant while unlocking powerful investment opportunities.
Start using your retirement funds to legally establish a new business or bankroll an existing business by opening up an account today with IRA Financial.
