How to Invest in Business Start-Ups With Your IRA

Each year three million new startups are created in the United States and with each of those another investment opportunity. By tapping into some of these startups you can potentially supercharge your retirement fund, but only if you choose your investments carefully and you dutifully follow all the rules involved with using a self-directed IRA with startups.

There are two different ways to invest money into a new startup using a SDIRA, the first is to invest money into startups that look promising to you, and the second, and slightly more complicated, way is to invest in your own startup that you stand to profit from.

The first method is relatively straightforward after you have a good custodian picked out that will allow you to invest in startups. After you have a supportive custodian you have to fund the IRA account through a rollover from one of your other retirement accounts, or through an annual contribution to the account. From there the process gets a little more complicated because you have to choose a startup that is going to be successful, and that’s not easy to do.

The best way to improve your odds of success when choosing a startup is to stick with things that you know about. For instance if you worked your whole life as an engineer, it may not be a bad idea to look at startups in the engineering sector because you will know what products are services are the most valuable there. If you don’t feel like you are qualified to make your own decision you can also rely on investment experts to help you find a good startup, but even a very talented advisor can’t guarantee that a company will be successful.

Now that you have found a startup that you truly believe in it is time to invest into it. The best way to do this is to buy stock from the company using funds in your IRA account. Later on when the company grows and becomes worth more money your stock will grow as well providing the potential for very respectable profits.

Trying to invest money into your own startup is quite a bit more complex, and can often lead to getting penalized from the IRS if you do anything wrong. First you have to create a C corporation. From there you have to roll over your IRA money into your company’s IRA. Now you can invest that IRA money into your business in exchange for stock from the company. Even though this method has worked for other investors in the past it doesn’t mean that it will work for you. It is very important to have attorneys and accountants help you out with this process to avoid incurring penalties by making the wrong move.

With the right help you can take your idle retirement account money and invest it into a promising new business venture. Just make sure you really do your research, and get help from professionals before risking all or part of your retirement.

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