Karen Blumenthal’s column in The Wall Street Journal over the weekend featured two of my favorite topics, self-directed IRAs and entrepreneurship, in a combined article. The details in the article, as well as the details of using a self-directed IRA to fund a small company, are complex.
- · You can’t lend money personally to the firm
- · You can’t guarantee a loan to the firm
- · You can’t ‘self-deal,’ which might prohibit taking a salary from the company
But, the article goes on to describe, you may be able to fund, or buy early shares in, a start-up company. While of course by definition this involves extraordinary risk, it’s also the kind of thing which could in rare cases lead to a Mitt Romney-sized IRA.
Only a few investments in IRAs are outright banned by the IRS, such as life insurance and certain collectibles, as well as one’s own home.
For mid-career entrepreneurs or angel investors with some built-up retirement savings, it’s an intriguing thought that many do not know about.
Please see related posts on the IRA:
IRAs don’t matter to high income people
A rebuttal: The curious case of Mitt Romney
The magical Roth IRA and inter-generational wealth transfer
The 2012 IRA Contribution Infographic
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One Reply to “A Source of Angel Funds: Your IRA”
This is another one of my pet topics. DIY/Self-directed allocation isn’t entirely easy. There’s considerable cognitive dissonance that must be withstood before going off the reservation. I believe all the infotainment people, with ticker-scrolls, earnings ratios, smart-sounding talking heads, work in chorus to reassure people that investing is complicated work and should only be entrusted to serious professionals.