Crowdfunding with a Self-Directed IRA: Should You Join the Crowd?

Crowdfunding is becoming an ever-popular avenue that provides those seeking capital (to fund business growth, start-ups, and other ventures) the ability to do so. The idea is to attract a crowd of investors to buy stock or equity options using either large or small funds.

While private placement opportunities that require large sums of cash are still reserved for elite, accredited investors, the Jobs Act, Title IV allows the less sophisticated investor to participate in other crowdfunding investments. You can personally invest in these assets, or you can use your self-directed IRA funds to invest and build tax-sheltered income for retirement on the returns. Thanks to the new laws, even if you have only a modest sum to invest and you decide to join the crowd, you are now able to do so if you meet certain requirements.

Under Title IV non-accredited investors can invest up to 10 percent of their yearly net income or worth in crowdfunding options. This limit prevents individuals from losing it all on one potentially unfruitful investment and even the wealthier investors have limits in place to protect them, too.

Crowdfunding is an alternative asset that presents many diverse opportunities to build wealth in your retirement portfolio. If you decide to participate in these options, there are a few things you should keep in mind.

Today’s crowdfunding rules allow investors to invest at low rates, but that doesn’t mean you should just jump at every opportunity you encounter. Performing due diligence is critical. Thoroughly investigate not only the asset and its potential, but also the persons involved. This helps you to avoid fraud and can help ensure your choices are legitimate and viable.

Regardless of how promising an investment may sound, it is your duty to fully understand the benefits as well as the risks. Seek credible and trusted advice as from reputable accountants or other financial advisors. Take care to ensure your needs are met and also be fully aware of what a potential loss may mean for you.

Advanta IRA is a nationwide self-directed retirement plan administrator that allows crowdfunding options in the plans we serve—not all administrators do. If you want to join the crowd using your retirement funds, it’s important that you choose your administrator as carefully as you choose your investments. We don’t sell investments or give financial or investing advice, but we do ensure your self-directed plans operate within compliance of IRS rules that govern them.

If you have questions about this article or would like more information on self-directed retirement plans, please contact us.

About Jack Callahan

Jack proudly earned his bachelor’s degree in finance and multinational business from Florida State University and his law degree from the University of Florida College of Law. He established Advanta IRA in 2003 and has steadily nurtured and grown the company and the team every year since. Prior to founding Advanta IRA, Jack delivered specialized counsel to real estate investors, small business owners, and real estate professionals on tax, legal and financial matters. As an industry expert, Jack is a frequent speaker on self-directed retirement plans. He is an accredited continuing education instructor for the Florida and Georgia Bar Associations, Florida and Georgia Real Estate Commissions, and The American Institute of Certified Public Accountants.