Ask Terry Questions Investing in private company

Investing in private company

By Terry Savage on August 24, 2018 | Wild Card

I have the opportunity to invest in a start up private company. Since my wife and I are raising small children, I don’t have any non-sheltered retirement money to invest. I won’t invest in the company if I have to pay a penalty to withdrawal from a retirement account. Is there any way to invest in the private company without withdrawing the funds from a sheltered account? Of course, the investment will equal less than 1/2 of 1 percent of my retirement’s total value. The investment money would definitely help the company.

Terry Says

Sorry, but the answer is NO. You need an approved “custodian” for a tax-sheltered account. That means the custodian must be a bank or mutual fund company, for example. And they won’t do that for a private investment. Some trust companies do hold real estate, or gold for IRA accounts — but they are not set up to hold investments in a private company.

I’d just like to add that the purpose of an IRA is to grow your money for the long run — not to speculate. You might be one of the very few who invest in a company that one day goes public. But, honestly, those “great chances” are typically reserved for sophisticated venture capital investors. With two young children, you might want to consider a 529 college savings plan.



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