“I didn’t even know that was allowable.”

This is the most common response we receive when speaking with NEW clients about the permissible alternative investment types that can be held by a self-directed IRA. Since most investors are waiting until qualified retirement age to distribute funds from their IRAs, alternative assets (which can typically require longer holding periods) can be a great fit for self-directed IRA holders.

Groups seeking to raise capital can employ strategies within their firms to include accepting investments from self-directed IRAs. These groups include:

  • Private Fund Managers
  • Crowdfunding Platforms
  • Privately Held Companies Issuing Stock and/or Debt
  • Venture Capital Firms

So why is this important for capital fundraisers?

Recent statistics and trends indicated below show the anticipation of several trillion dollars from qualified retirement plans to be rolled over into IRAs in the near future. Educating your clients that they can make investments using self-directed IRAs offers them another outlet for acquiring alternative assets. The point is, IRAs are becoming more popular—and self-directed IRAs are yet another way to fund alternative investment acquisitions.

Via Ascensus, Inc. (2/2015) The Link
  • Investment Company Institute estimates that five percent of the national IRA portfolio of $6.2 trillion is in government insured time deposits. That equates to about $310 billion sitting in deposit IRAs.
  • Cerulli Associates, a Boston-based analytics firm, estimated that in 2013 $324 billion rolled out of qualified retirement plans (such as 401ks) and into IRAs.
  • There are approximately 78 million baby boomers who began turning 65 in Jan. 2011. 12,000 baby boomers a day for the next 15 years will continue to turn 65. Since many of them will be entering retirement, they are moving their retirement savings into IRAs, therefore moving massive amounts of money. (Via Ascensus, Inc. (2/2015) The Link)
  • Cerulli Associates estimates that qualified retirement plan rollovers into IRAs will increase year over year, from the estimated $324 billion in 2013 to just under $500 billion by 2020. (The Cerulli Report, Evolution of the Retirement Investor 2014, Understanding 401(k) Participant Behavior and Trends in IRAs, Rollovers, and Retirement Income).
  • Employee Benefit Research Institute (EBRI) reported that in 2012, almost one-fifth of the individuals in its database who rolled over qualified retirement plan assets did so with a six-figure balance or more (EBRI Issue Brief, No. 399, May 2014).

Contact Midland IRA today to discuss a custom tailored solution for your firm’s next round of capital fundraising!

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