Solo 401(k) Year-End Checklist
The Solo 401(k) is the most generous retirement plan available to self-employed people, but it's also the one where deadlines sneak up fastest. Some decisions have to be made by December 31, others can wait until you file your tax return, and one filing comes due the following summer. This Solo 401(k) year-end checklist walks through what to do before the year closes, what you can still do after, and what's new for 2026.
Key Takeaways
- For 2026, total Solo 401(k) contributions can reach $72,000, or up to $83,250 with catch-up contributions at ages 60 to 63.
- Employee deferrals generally must be elected by December 31, while employer contributions can wait until your tax filing deadline.
- Starting in 2026, catch-up contributions must be Roth for participants whose prior-year FICA wages from the plan sponsor exceeded $150,000.
- Form 5500-EZ is due July 31 for calendar-year plans once combined plan assets exceed $250,000 at year-end.
- Year-end is the time to value alternative assets, check loan payments, and confirm your beneficiaries.
2026 Solo 401(k) Contribution Limits
Before you plan any year-end contributions, know your ceiling. As a Solo 401(k) owner you wear two hats: as the employee you make elective deferrals, and as the employer you make profit-sharing contributions. The IRS limits for 2026 are:
| 2026 limit | Under 50 | Age 50 to 59 and 64+ | Age 60 to 63 |
|---|---|---|---|
| Employee deferral | $24,500 | $32,500 | $35,750 |
| Total contributions (employee + employer) | $72,000 | $80,000 | $83,250 |
The employee deferral can be up to 100% of your compensation, up to the dollar limit. The employer contribution is generally up to 25% of compensation for an S or C corporation owner. For a sole proprietor or single-member LLC, it works out to about 20% of net self-employment earnings, because IRS Publication 560 requires the contribution itself to be taken into account when calculating net earnings. If you have a 401(k) at another job too, remember that the $24,500 deferral limit is per person across all plans, not per plan.
The practical step for year-end: estimate your 2026 net business income now, so you know how much room you have before December 31.
Solo 401(k) Year-End Deadlines
The biggest mistake I see is assuming every contribution can wait until April. It can't. Here's how the deadlines line up for a calendar-year plan and a calendar-year business:
| What | Deadline for the 2026 plan year |
|---|---|
| Elect your 2026 employee deferrals | December 31, 2026 |
| W-2 owners (S or C corp): run deferrals through payroll | Final 2026 payroll |
| Employer profit-sharing contributions | Your business tax return due date, including extensions (March 15, 2027 for most S corporations; April 15, 2027 for sole proprietors) |
| Adopt a new Solo 401(k) for 2026 | Your business tax return due date, including extensions |
| File Form 5500-EZ, if required | July 31, 2027, or October 15, 2027 with a Form 5558 extension |
Elective Deferrals Have to Be Elected by December 31
IRS Publication 560 is clear that employee deferrals must be elected by the end of the tax year. For a sole proprietor, the money itself can be deposited up to your tax filing deadline, but the written election has to exist by December 31. Put it in writing and keep it with your plan records. If you're an S corporation owner, deferrals come out of your W-2 wages, so they need to run through payroll before the year closes.
The SECURE Act lets you set up a brand-new plan as late as your tax filing deadline and still make employer contributions for the prior year, and SECURE 2.0 added a narrow first-year exception for sole proprietors' deferrals. Both are useful safety nets, but setting the plan up before December 31 keeps every option open.
Form 5500-EZ
A Solo 401(k) has no annual filing until total assets across your one-participant plans exceed $250,000 at year-end, and a final return is always required in the year the plan distributes everything. According to the Form 5500-EZ instructions, the return is due by the last day of the seventh month after the plan year ends, which is July 31 for calendar-year plans. Don't let this slide. The IRS late-filing penalty is $250 per day, up to $150,000 per return, though a relief program lets late filers catch up for $500 per return.
New for 2026: The Roth Catch-Up Rule
This is the first year the SECURE 2.0 Roth catch-up requirement is in effect, and it catches some Solo 401(k) owners off guard. If you're 50 or older and your prior-year FICA wages from the business sponsoring the plan exceeded $150,000, every dollar of your 2026 catch-up contribution has to be made as a Roth contribution. Your regular $24,500 deferral can still be pre-tax.
Book a free call with a self-directed retirement specialist
- Review your self-directed retirement options
- Learn about investing in alternative assets
- Get all of your questions answered
Who does this hit? The rule is built around W-2 wages, so it mainly affects owners of S corporations and C corporations who pay themselves a salary. Self-employment income reported on Schedule C or a partnership K-1 isn't FICA wages, and neither is investment income or wages from a different employer, so sole proprietors generally aren't caught by the wage test. I still tell clients to confirm their own situation with their tax advisor before year-end.
The year-end action item is simple. If you're affected, make sure your plan document allows Roth deferrals before you make a catch-up contribution, because a plan without a Roth option can't accept catch-up dollars from an affected participant at all. I explain the details in The New 2026 Solo 401(k) Roth Catch-Up Rule.
Year-End Housekeeping for a Self-Directed Solo 401(k)
Value Your Alternative Assets
If your Solo 401(k) holds real estate, a private company stake, a promissory note, or precious metals, you need a reasonable December 31 value for each one. That number decides whether you've crossed the $250,000 Form 5500-EZ threshold, and it's what you report if you do file. For a rental property, a broker's opinion or recent comparable sales usually works. For a private investment, ask the sponsor for a year-end statement.
Check Your Participant Loan
If you borrowed from your plan, confirm that every payment due this year was made. Under the IRS plan loan rules, payments have to be made at least quarterly, and a loan that falls out of compliance can be treated as a taxable distribution. Year-end is a good time to catch a missed payment before it becomes a tax problem.
Take Any Required Minimum Distribution
If you've reached age 73, your Solo 401(k) is subject to required minimum distributions. Business owners can't use the "still working" exception that lets some employees delay 401(k) RMDs, so plan for it. Your RMD generally has to come out by December 31, except your first one, which can wait until April 1 of the following year. Roth Solo 401(k) accounts are no longer subject to lifetime RMDs under SECURE 2.0.
Review Beneficiaries and Records
Confirm your primary and contingent beneficiaries are current, especially after a marriage, divorce, or birth. A 401(k) generally requires your spouse's written consent if you name someone else. Then tidy your records: keep the plan's bank and brokerage statements separate from your business accounts, note which contributions were employee deferrals and which were employer contributions, and make sure income from plan investments went back into the plan.
Your Solo 401(k) Year-End Checklist
Before December 31, 2026
- Estimate 2026 net business income or W-2 wages to size your contributions
- Sign a written election for your 2026 employee deferrals
- S or C corporation owners: run deferrals through your final payroll
- If you're 50+ and had prior-year FICA wages over $150,000, confirm your plan allows Roth catch-up contributions
- Take your RMD if you're 73 or older (first-year RMDs can wait until April 1)
- Confirm all participant loan payments for the year were made
- Set up a new Solo 401(k) now if you want the most flexibility for 2026
At year-end
- Record a December 31 value for every alternative asset in the plan
- Total all one-participant plan assets to see if you're over $250,000
- Review primary and contingent beneficiaries
By your 2026 tax filing deadline
- Deposit remaining employee deferrals (sole proprietors)
- Make your employer profit-sharing contribution
- Work with your CPA to report contributions correctly on your return
By July 31, 2027
- File Form 5500-EZ if plan assets exceeded $250,000 at year-end, or file Form 5558 to extend
Final Thoughts
Most Solo 401(k) problems I see at tax time trace back to something that should have happened in December: a deferral election that was never signed, a loan payment that got skipped, or a catch-up contribution made into a plan that couldn't accept it. None of these take long to fix in advance. They're much harder to fix after the fact.
This is also why I built IRA Financial's Solo 401(k) with Form 5500-EZ preparation and plan document updates included in the $399 annual fee, so the paperwork side doesn't fall through the cracks. If you have a plan loan, I cover the repayment rules in more depth in The Definitive Guide to the Solo 401(k) Participant Loan. Block an hour on your calendar this month, work through the list above, and you'll start 2027 with a clean plan and every contribution you're entitled to.
This content is for educational purposes only and does not constitute legal, tax, or investment advice. Consult a qualified professional before making any investment decisions.
How to Raise Capital Using an IRA in 2026
When most private businesses, real estate sponsors, and fund managers think about raising money, they focus on wealthy individuals, family offices, private equity firms, and institutional investors. Many overlook an enormous source of investment capital: Individual Retirement Accounts. As a tax attorney who has spent almost 16 years helping Americans use retirement funds to invest in alternative assets, I believe the ability to raise capital using an IRA is one of the most underutilized opportunities available to private investment sponsors. With the right structure and the right Self-Directed IRA partner, it can be relatively straightforward, but there are tax, legal, and structuring issues every sponsor needs to understand first.
Key Takeaways
- IRA assets reached approximately $19.9 trillion as of June 30, 2026, making IRAs one of the largest pools of investment capital in the world.
- IRAs can legally invest in private equity, real estate, private credit, and private businesses, subject to the prohibited transaction rules.
- Schwab, Fidelity, and other brokerages restrict alternative investments for business reasons, not because the IRS prohibits them.
- UBIT can apply to IRA income from active businesses or leveraged real estate held through pass-through entities, taxed at trust rates up to 37%.
- Domestic and offshore blocker corporations can reduce or potentially eliminate UBIT exposure for IRA investors when properly structured.
The $19 Trillion IRA Marketplace Is an Enormous Opportunity
According to the Investment Company Institute, Americans held approximately $19.9 trillion in IRAs as of June 30, 2026, which exceeds the size of many of the largest investment markets in the world. The market keeps growing, too. Every year, Americans retire, change jobs, or leave employers and roll hundreds of billions of dollars from 401(k) plans into IRAs, and industry estimates suggest nearly $1 trillion could move into IRAs through rollovers in 2026 alone. Once those funds are in an IRA, investors generally have far more flexibility in how they’re invested.
Consider a private real estate fund looking to raise $50 million. Rather than relying exclusively on institutional investors or wealthy individuals investing personal savings, the sponsor could also target qualified investors with substantial retirement savings. An investor who may not have $250,000 in available personal cash could easily have $500,000 or more sitting in an IRA, and that capital could potentially go into the fund without the investor withdrawing the money, paying ordinary income taxes, or incurring an early distribution penalty. IRA capital isn’t new money investors need to earn or save. It’s existing capital that can be redirected into private investments, which opens the door to a much larger universe of potential investors.
Why IRAs Are Ideally Suited for Illiquid Alternative Investments
Most retirement investors can’t access their IRA funds before age 59½ without potentially triggering a 10% early distribution penalty on top of ordinary income taxes. As a result, retirement money is generally meant to stay invested for years, sometimes decades, which creates a natural fit with alternative investments that require longer holding periods.
A private equity fund may have a seven-to-ten-year horizon. A real estate development project may take five years before investors get their capital back, and a venture capital investment may take a decade or longer to generate meaningful returns. These investments may not suit someone who needs immediate access to their money, but they can make considerable sense inside an IRA, particularly for investors many years from retirement. IRA investors still need to plan for required minimum distributions, generally beginning at age 73, as well as unexpected financial needs and diversification. Nevertheless, I believe retirement accounts are among the most natural vehicles for long-term alternative assets like real estate, private business stock, and private equity, and IRA investors may be more comfortable with longer lockup periods when those periods fit their retirement goals.
What Can an IRA Actually Invest In?
One of the biggest misconceptions about IRAs is that they’re limited to stocks, bonds, mutual funds, and ETFs. That’s simply not true. Under the Internal Revenue Code, an IRA can generally invest in almost any asset, including private equity, venture capital, hedge funds, private credit, real estate, investment partnerships, and private businesses. The rules contain no general prohibition against investing in privately held companies or investment funds. You can read more about the assets a Self-Directed IRA can hold and the gray areas to watch.
The primary restrictions involve collectibles, life insurance contracts, and transactions involving disqualified persons. Under Internal Revenue Code Section 4975, an IRA generally can’t engage in prohibited transactions with the IRA owner or certain related parties. For example, an IRA owner generally can’t use retirement funds to invest in a business they personally control or in a transaction that improperly benefits themselves or certain family members.
These rules typically present far fewer concerns when an IRA makes a passive investment in an unrelated third-party fund. If an IRA investor wants to invest $100,000 as a limited partner in an unrelated private equity fund, and the investment is properly structured, the IRA can generally make that investment. The investor doesn’t withdraw the $100,000. The IRA itself becomes the limited partner and owns the investment. For sponsors, accepting IRA investors is often much simpler than they might initially believe.
Book a free call with a self-directed retirement specialist
- Review your self-directed retirement options
- Learn about investing in alternative assets
- Get all of your questions answered
Why Schwab, Fidelity, and Traditional Brokerages Restrict IRA Alternative Investments
If IRAs can legally invest in private funds and businesses, why do most Americans believe their retirement savings must stay in traditional financial products? Most large brokerage firms, including Schwab and Fidelity, generally don’t permit ordinary retail IRA accounts to invest directly in privately held businesses, real estate, or many private funds. That’s a business and operational decision, not an IRS rule. Traditional brokerages are built to hold and trade publicly traded securities, while private investments require different administrative procedures, documentation, valuations, and tax reporting. A Self-Directed IRA custodian, on the other hand, is specifically structured to let retirement investors hold alternative assets.
This distinction is extremely important for sponsors. An investor may have $1 million in an IRA at a traditional brokerage and mistakenly believe those funds can’t go into a private real estate fund. In reality, the investor may be able to transfer some or all of those funds to a Self-Directed IRA custodian and then make the investment, and a properly completed IRA-to-IRA transfer generally doesn’t trigger income taxes or an early distribution penalty. Educating prospective investors about Self-Directed IRAs can unlock capital they may not even realize is available to them.
UBIT: The Most Important Tax Issue When You Raise Capital Using an IRA
Although IRAs generally offer tax-deferred growth, or potentially tax-free growth in a Roth IRA, not every type of investment income escapes current taxation. One of the most important issues for sponsors accepting IRA capital is Unrelated Business Income Tax, or UBIT.
UBIT can apply when an IRA earns income from an active trade or business conducted through a pass-through entity, such as an LLC or partnership. Assume an IRA invests $200,000 into a private fund structured as an LLC taxed as a partnership. If the fund operates an active business or invests in operating businesses through pass-through entities, a portion of the income allocated to the IRA may be subject to UBIT. UBIT can also arise when an IRA invests in certain debt-financed investments, including leveraged real estate, under the unrelated debt-financed income rules, which is especially important for real estate sponsors and private equity funds that use leverage.
For 2026, the federal trust income tax brackets reach the top 37% rate at relatively low levels of taxable income, roughly $16,000. That means an IRA could face a significant federal tax liability on income generated by an investment even though the money stays inside the retirement account. If a fund allocates $100,000 of net unrelated business taxable income to an IRA, the IRA could owe a substantial amount of tax. The tax is generally paid by the IRA itself, not personally by the IRA owner, and an IRA with sufficient unrelated business taxable income may need to file IRS Form 990-T.
Not all private investment income triggers UBIT. Interest, dividends, many capital gains, and other passive returns are generally excluded, subject to exceptions such as debt-financed income. That’s why the fund’s underlying strategy and legal structure matter so much. A fund investing in C corporation stock may produce a very different IRA tax result from one investing directly in operating LLCs, and identifying potential UBIT exposure before investors subscribe can make the investment much more attractive.
How a Blocker Corporation Can Help Minimize UBIT
One of the most important things I’ve learned as a tax attorney is that the legal structure of an alternative investment can be just as important as the investment itself. There are legitimate ways to reduce or potentially eliminate UBIT for IRA investors, and I’ve written more about smart ways to avoid UBTI in a Self-Directed IRA.
Domestic C Corporation Blockers
Assume a private equity fund invests in operating businesses through LLCs that generate income potentially subject to UBIT. Instead of having the IRA invest directly through the pass-through structure, a domestic C corporation can be placed between the IRA and the underlying investment. The corporation pays federal corporate income tax at a flat 21% rate, and dividends later distributed to the IRA are generally excluded from UBIT. This can reduce the federal tax burden compared with having income taxed directly to the IRA at trust rates reaching 37%. However, a corporate blocker may introduce a second layer of tax or other costs, so the structure must be analyzed carefully.
Offshore Corporate Blockers
For certain investments, an offshore corporation can prevent operating business income or debt-financed income from flowing directly into an IRA as UBIT. If properly structured, the offshore corporation may receive income that isn’t subject to U.S. federal income tax, and dividends paid to the IRA may also be excluded from UBIT. In those circumstances, it may be possible to eliminate UBIT and significantly reduce the overall U.S. tax burden. Offshore blockers aren’t automatically tax-free, though. Effectively connected income, withholding taxes, anti-deferral rules, and other provisions must be considered. Real estate presents additional challenges under the Foreign Investment in Real Property Tax Act (FIRPTA), which can subject foreign corporations to U.S. tax on gains from U.S. real property interests and makes offshore blockers less effective for many U.S. real estate investments. For a closer look, see how to invest in a credit fund with an IRA using a foreign blocker.
A properly designed fund structure can potentially save IRA investors substantial amounts in taxes. For sponsors, that’s more than a compliance issue. It can become a meaningful competitive advantage when raising retirement capital.
Not All Self-Directed IRA Companies Are the Same
One mistake I see fund sponsors make is assuming every Self-Directed IRA company offers the same level of service and expertise. Some custodians focus primarily on holding assets, processing paperwork, and basic administration. Those functions are important, but they don’t necessarily address the more complicated tax and structuring issues that arise when IRAs invest in private funds, operating businesses, or leveraged real estate.
At IRA Financial, we take a different approach. Helping someone invest in an alternative asset involves more than opening an IRA and processing an investment. It requires understanding how the investment is structured, whether UBIT may apply, whether prohibited transaction concerns exist, and whether there are legitimate opportunities to improve the investment’s tax efficiency. For example, a private equity sponsor raising $100 million through a partnership structure that could generate UBIT may benefit from working with an experienced Self-Directed IRA provider and qualified tax counsel before accepting IRA capital, so it can evaluate alternatives like domestic or offshore blockers that could improve after-tax results for retirement investors. We’ve helped thousands of investors access alternative investments using retirement funds, and I believe our combination of Self-Directed IRA experience, tax knowledge, and alternative investment expertise puts us in a unique position to help sponsors and investors navigate this market.
How Fund Sponsors Can Start Raising Capital From IRA Investors
For a private business or investment sponsor interested in the IRA marketplace, the process doesn’t have to be complicated.
| Step | What Sponsors Should Do |
|---|---|
| Review offering documents | Confirm they permit investments from IRAs and other retirement accounts. |
| Assess the structure | Evaluate whether the investment could generate UBIT or create prohibited transaction concerns. |
| Prepare for IRA investors | Understand subscription documents, ownership registration, funding instructions, valuations, and annual reporting. |
| Stay compliant | Follow federal and state securities laws. IRA eligibility doesn’t eliminate accredited investor or other investor qualification requirements. |
| Design for long-term investors | Offer understandable business models, reasonable fees, appropriate diversification, and clearly explained liquidity restrictions. |
| Choose the right partner | Work with a Self-Directed IRA company that understands alternative investments and coordinates with legal and tax professionals. |
Final Thoughts
The U.S. retirement market represents an extraordinary opportunity for private businesses, real estate sponsors, and fund managers. Much of the nearly $20 trillion held in IRAs remains invested in traditional financial products, even though the tax rules generally permit IRAs to own a wide range of alternative investments. Retirement investors can be a natural fit for long-term investments, especially private equity, venture capital, private credit, and real estate. But tax efficiency matters, and an investment that generates unnecessary UBIT may be considerably less attractive than one designed with IRA investors in mind.
At IRA Financial, our mission is to help Americans unlock their retirement savings and invest in alternative assets as easily and cost-effectively as possible, while understanding the tax advantages and potential traps. For sponsors looking to raise capital, my message is simple: don’t overlook the IRA marketplace. Your next investor may already have the capital you need sitting inside a retirement account.
This content is for educational purposes only and does not constitute legal, tax, or investment advice. Consult a qualified professional before making any investment decisions.
Pitfalls of Owning Real Estate in an IRA
I've helped thousands of investors buy rental homes, apartment buildings, and land with retirement money, and I'm a strong believer in it. But owning real estate in an IRA comes with rules that don't exist when you buy property in your own name, and the pitfalls tend to catch people who are experienced landlords outside their IRA. Below are the mistakes I see most often, why they matter, and how to avoid every one of them.
Key Takeaways
- You and close family members can't live in, use, or personally work on property your IRA owns.
- Every expense must be paid from the IRA, so an account without cash reserves can be forced into a bad decision.
- Financing requires a non-recourse loan, and the debt-financed share of income can trigger UDFI tax.
- An IRA can't use depreciation or rental losses, and traditional IRA gains are taxed as ordinary income when withdrawn.
- A single prohibited transaction can disqualify the entire IRA as of January 1 of that year.
Prohibited Transactions With Real Estate in an IRA
This is the big one. Under Internal Revenue Code Section 4975, your IRA can't do business with disqualified persons. That group includes you, your spouse, your parents and grandparents, your children and grandchildren and their spouses, any fiduciary of the account, and businesses you or those relatives control. Your siblings, cousins, and friends are not disqualified, which surprises people.
In real estate, the violations usually look innocent:
- Personal use. You can't live in the property, stay in an IRA-owned vacation home for a weekend, or let your daughter rent it, even at market rent.
- Buying from or selling to family. Your IRA can't buy the rental house you already own or sell a property to your son.
- Sweat equity. You can't paint, fix the roof, or swap a water heater yourself. Your unpaid labor is a contribution of services that benefits the account. Hire an unrelated contractor and pay them from the IRA.
- Personal guarantees. You can't sign personally on a loan for the IRA's property, which is why financing has to be non-recourse.
The penalty is severe. According to IRS Publication 590-A, if you engage in a prohibited transaction, the account stops being an IRA as of the first day of that year and the entire balance is treated as distributed at fair market value. If you're under 59½, an early distribution penalty can apply on top of the income tax. One weekend at the beach house can cost you the whole account, not just the beach house. I go through the full list in Self-Directed IRA Real Estate Rules and Restrictions.
Running Out of Cash Inside the IRA
When you own a rental personally and the furnace dies, you pull out a credit card. With an IRA-owned property you can't. Property taxes, insurance, repairs, HOA dues, and management fees all have to be paid from the IRA, and every dollar of rent has to go back into it. Paying a bill out of pocket and reimbursing yourself later can be treated as an extension of credit to the IRA, which is a prohibited transaction.
That makes liquidity a real risk. I see investors put nearly their entire IRA into one property, then face a $15,000 roof replacement with $2,000 left in the account. Your options at that point are limited: make a new contribution, which is capped by the annual IRA limit; transfer in money from another IRA; or sell the property on someone else's timeline. My rule of thumb is to keep a cash reserve inside the IRA large enough to cover several months of expenses and at least one major repair, and to plan for vacancies before you buy, not after.
Financing Restrictions and the UDFI Tax
Your IRA can borrow to buy property, but only with a non-recourse loan, meaning the lender can look only to the property if the loan goes bad, never to you personally. Fewer lenders offer these loans, and the ones that do usually want 30% to 40% down and charge more than a conventional mortgage.
Leverage also brings a tax most IRA owners don't expect. The share of income tied to the debt is unrelated debt-financed income, or UDFI, and the IRA owes tax on it. Say your IRA buys a $400,000 rental with $160,000 down and a $240,000 non-recourse loan, so the property is 60% debt-financed. If it produces $20,000 of net rental income, roughly $12,000 is UDFI. Once that reaches $1,000 in a year, the IRA has to file Form 990-T and pay tax at trust rates, which climb to 37% at a far lower income level than individual rates do. The same percentage applies to the gain when you sell, so a debt-financed sale can produce a meaningful tax bill inside an account people assume is tax-free.
Book a free call with a self-directed retirement specialist
- Review your self-directed retirement options
- Learn about investing in alternative assets
- Get all of your questions answered
This is one place where a Solo 401(k) is the better tool. Qualified plans get an exception under Section 514(c)(9) for real estate debt, so a Solo 401(k) can generally use a non-recourse loan without UDFI. If you have self-employment income and plan to use leverage, it's worth comparing the two. I explain the details in Non-Recourse Loans for IRA Real Estate.
Losing the Tax Breaks Landlords Count On
Real estate held personally comes with some of the best tax benefits in the code. Inside an IRA, most of them disappear.
- Depreciation. A personal rental lets you deduct depreciation each year against the income. The IRA already doesn't pay tax on rental income, so depreciation does nothing for you.
- Losses. If an IRA property loses money, you can't deduct that loss on your personal return.
- Capital gains rates and 1031 exchanges. A property you own personally can qualify for long-term capital gains rates, and investors often defer gains with a 1031 exchange. Inside a traditional IRA, the gain grows tax-deferred, but every dollar comes out later taxed as ordinary income.
- Mortgage interest and property tax deductions. They don't flow through to you.
None of this makes IRA real estate a bad investment. Tax-free or tax-deferred compounding on rental income for 20 or 30 years is powerful, and with a Roth IRA, qualified withdrawals are tax-free, gains included. But if a property's appeal depends mainly on depreciation and write-offs, it's probably a better fit for your taxable account than for your IRA.
Valuations, RMDs, and Getting the Property Out
An IRA has to report its fair market value every year, so your custodian will ask you for a value on the property each year-end. For a single-family rental that may be a broker opinion; for commercial property or raw land it can mean a formal appraisal. It's a small cost, but people forget to budget for it.
The bigger issue comes later. With a traditional IRA, required minimum distributions generally begin at age 73, and they're calculated on the account's total value, including the house. If most of the IRA is tied up in one property and there isn't enough cash to cover the RMD, you have three choices: sell the property, take an in-kind distribution of a percentage interest in the deed, or bring the account cash from other IRAs. An in-kind distribution works, but you'll owe income tax on the value distributed with no cash from the property to pay it, and you'll end up co-owning the house with your own IRA. Roth IRAs avoid this problem for the original owner because they have no lifetime RMDs, which is one reason I like Roth accounts for long-term real estate holdings.
Plan your exit before you buy. If you're in your 60s, think about how you'll cover RMDs from the start, whether that's keeping other liquid assets in the IRA or picking a property you'd be comfortable selling in a decade.
How to Avoid Each Pitfall
| Pitfall | What goes wrong | How to avoid it |
|---|---|---|
| Personal use | You or family use the property, disqualifying the IRA | Rent only to unrelated tenants; never stay there yourself |
| Sweat equity | Doing your own repairs counts as a prohibited contribution of services | Hire unrelated contractors and pay them from the IRA |
| Paying expenses personally | Out-of-pocket payments are treated as an extension of credit | Run every expense and every dollar of rent through the IRA |
| No cash reserve | A major repair forces a sale or a scramble for funds | Keep enough cash in the IRA for repairs, vacancies, and taxes |
| Recourse financing | A personal guarantee is a prohibited transaction | Use a non-recourse lender only |
| UDFI tax | Debt-financed income and gains are taxed at trust rates | Buy with cash, or consider a Solo 401(k) if you're self-employed |
| Lost tax breaks | No depreciation, loss deductions, or capital gains rates | Hold write-off-driven deals outside the IRA |
| RMDs on an illiquid asset | No cash to cover required distributions | Plan liquidity early, or use a Roth IRA |
Final Thoughts
Every pitfall above is avoidable, and none of them are a reason to stay away from real estate. One of our clients, James, a preacher, built his Self-Directed Roth IRA to $3.5 million through real estate, and he did it by respecting the rules from day one. The investors who get hurt are usually the ones who treat an IRA property like one they own personally.
That's also why the fee structure you choose matters. At IRA Financial, a Self-Directed IRA costs a flat $495 a year, with no fees that rise as your property gains value, and our in-house tax and ERISA specialists can review a deal before you close. Whoever you work with, ask the hard questions before the purchase, keep the property at arm's length, and you can build real wealth with real estate inside your retirement account.
This content is for educational purposes only and does not constitute legal, tax, or investment advice. Consult a qualified professional before making any investment decisions.
Contingent Beneficiaries: What Happens If Your Beneficiary Dies First
Most people fill out a beneficiary form once, name a spouse, and never look at it again. The problem shows up when that beneficiary dies first and nobody is listed behind them. Contingent beneficiaries are the backup that keeps your IRA or 401(k) out of probate and in the hands of the people you actually chose, and in my experience as a tax attorney they're one of the most overlooked lines in all of retirement planning.
Key Takeaways
- A contingent beneficiary inherits only if every primary beneficiary has died, can't be found, or disclaims the account.
- With no living primary and no contingent named, most accounts pass to your estate under the custodian's default rules.
- An estate is not a designated beneficiary, which can force faster payouts and drag the account through probate.
- Per stirpes and per capita elections decide whether a deceased beneficiary's share goes to their children or to the other beneficiaries.
- The beneficiary form overrides your will, so review it after every marriage, divorce, birth, or death.
Primary vs. Contingent Beneficiaries
Your primary beneficiary is first in line. When you die, the account goes to that person, or is split among several primary beneficiaries by the percentages you set. A contingent beneficiary, sometimes called a secondary beneficiary, is the next tier. They inherit only if no primary beneficiary is able to take the account, which usually means the primary died before you, died at the same time, or chose to disclaim it.
A common setup is a spouse as the 100% primary and the children as equal contingents. If the spouse survives you, the children get nothing from that account directly, and the spouse can name new beneficiaries later. If the spouse is already gone, the children step up automatically, with no court involvement. That automatic step-up is the reason to name a contingent at all.
One point I stress with every client: the beneficiary designation form controls who gets a retirement account, not your will. A will that leaves everything to your kids does nothing for an IRA whose form still names an ex-spouse or a parent who has since passed away. For a 401(k) or other ERISA plan, federal law generally also makes your spouse the beneficiary unless they've signed a written consent to someone else.
What Happens If Your Beneficiary Dies First
The answer depends on who else is on the form. These are the situations I see most often:
| Situation | Who inherits |
|---|---|
| One primary dies before you, a contingent is named | The contingent beneficiaries, in the percentages you listed |
| One of several primaries dies before you | Usually the surviving primaries, unless you elected per stirpes for that beneficiary |
| All primaries die before you, no contingent named | Whoever the custodian's or plan's default rules name, most often your estate |
| Your beneficiary survives you but dies before claiming the account | Generally that beneficiary's own estate or named successor, not your contingent |
The last row surprises people. Once you die and your primary beneficiary survives you, even briefly, the account belongs to them. If they then pass away before moving it into an inherited IRA, the money typically follows their estate plan, not yours, unless they had already named their own successor beneficiary.
Why Defaulting to Your Estate Is a Problem
When no beneficiary is left, the account falls back to the default terms in your IRA custodial agreement or plan document. For most accounts that means your estate. That's a poor outcome for three reasons. First, the account has to go through probate, which is public, slow, and can tie up the money for many months. Second, it's exposed to the claims of your creditors in a way a directly inherited account often isn't. Third, an estate isn't a person, so under the IRS rules it isn't a designated beneficiary. If you died before your required beginning date, a non-designated beneficiary generally has to empty the account by the end of the fifth year after your death, according to IRS Publication 590-B. That's half the 10 years most individual heirs would get.
Per Stirpes vs. Per Capita
If you name more than one beneficiary in a tier, you need to decide what happens to a share when one of them dies before you. Two Latin terms do the work.
Per capita ("by the head") splits the account among the beneficiaries who are still alive. Say you name your three children equally and one dies before you. Under per capita, the two surviving children each take half, and the deceased child's kids get nothing from that account.
Per stirpes ("by the branch") keeps each share within that beneficiary's family line. In the same example, each surviving child takes one-third, and the deceased child's third passes down to their children.
Neither is right for everyone, but if you want grandchildren to step into a parent's place, per stirpes is usually what you mean. Not every custodian offers it on the standard form, so check before assuming it applies, and attach an addendum if needed.
Simultaneous Death and Disclaimers
Spouses who die in the same accident create a special problem: who died first? Many states follow a version of the Uniform Simultaneous Death Act, which generally treats a beneficiary who doesn't survive you by 120 hours as having died before you. That pushes the account to your contingent beneficiaries rather than through your spouse's estate. Check your state's rule and the custodian's form, since some plans set their own survival period.
A living primary beneficiary can also pass the account down on purpose by disclaiming it. Under the Treasury regulations for a qualified disclaimer, the refusal must be in writing, delivered within nine months, made before accepting any benefits from the account, and the beneficiary can't direct where the money goes. It then passes as if they had died first, usually to the contingent. A surviving spouse with plenty of other assets will sometimes disclaim so the account goes straight to the children, which only works if contingents were named in the first place.
How Contingent Beneficiaries Are Taxed
A contingent beneficiary who inherits is treated exactly like any other beneficiary under the SECURE Act rules. What matters is who they are, not which line of the form they were on.
Most individuals inheriting today must empty the account by the end of the 10th year after the owner's death, according to the IRS beneficiary rules. If you died before your required beginning date, they can generally take the money whenever they like within that window. If you had already started required minimum distributions, which begin at age 73, the final IRS regulations require them to keep taking annual distributions in years one through nine and finish by year 10, starting with 2025 distributions.
A smaller group, called eligible designated beneficiaries, can still stretch distributions over their own life expectancy:
- A surviving spouse
- A minor child of the account owner, until reaching the age of majority
- A disabled or chronically ill individual
- Someone not more than 10 years younger than the owner
This is why the choice of contingent matters for taxes too. If your spouse predeceases you and your contingents are your adult children, each will be on the 10-year clock. If your contingent is your estate, or there's no contingent at all, the payout rules are often less favorable and probate adds months of delay on top. Roth accounts are still subject to these timing rules, but qualified distributions come out tax-free, which makes a Roth a particularly good asset to leave to younger heirs.
How to Name Contingent Beneficiaries the Right Way
Naming a contingent takes five minutes, but small mistakes on the form cause most of the problems I see after a death.
- Use full legal names and identifying details. "My children" invites disputes. List each person with a date of birth or Social Security number.
- Make the percentages add up to 100% in each tier. Primary and contingent tiers are calculated separately.
- Choose per stirpes or per capita on purpose. If the form doesn't ask, find out what the custodian's default is.
- Don't name a minor outright. A child can't legally control an inherited IRA, so a court-appointed guardian may be needed. A properly drafted trust or a UTMA custodian is usually the better contingent for young children.
- Coordinate trusts with an attorney. A trust can be a contingent beneficiary, but only a trust that meets the IRS look-through rules is treated favorably for distribution purposes.
- Review after every life event. Marriage, divorce, a birth, or a death in the family should all send you back to the form.
Extra Considerations for Self-Directed IRAs
With a Self-Directed IRA, the stakes go up because the account often holds assets that can't be split or sold in a day, like a rental property, a private company stake, or an LLC interest. If the account ends up in your estate, a probate court may need to approve every step before anyone can collect rent, pay property taxes, or sell the property. With clear primary and contingent designations, the custodian can retitle the asset into a Self-Directed Inherited IRA for each beneficiary and the investments keep running. Think, too, about whether your contingents can actually manage the asset. Three siblings inheriting one rental house together need a plan for who makes decisions, and I cover the options in Can an Inherited IRA Be Split Between Siblings?
Book a free call with a self-directed retirement specialist
- Review your self-directed retirement options
- Learn about investing in alternative assets
- Get all of your questions answered
When I started IRA Financial in 2010, a big part of the goal was giving investors control over their own retirement money. That control extends to deciding who gets it next. Our clients can review and update their beneficiaries at any time, and I'd encourage every account holder, with us or anywhere else, to pull up their form this week and confirm a contingent is on it.
Final Thoughts
A contingent beneficiary costs nothing to name and can save your family months in probate, a faster tax bill, and a fight over who was supposed to get what. Your primary beneficiary is the plan for how things are supposed to go. Your contingent is the plan for when life doesn't follow the script. If you want to go deeper, I explain what the IRS does when no one is named in What Happens to an IRA With No Named Beneficiary? and walk through the payout rules heirs face in Inherited IRAs: Everything You Need to Know. Take ten minutes, pull up every retirement account you own, and make sure each one has a name in both lines.
This content is for educational purposes only and does not constitute legal, tax, or investment advice. Consult a qualified professional before making any investment decisions.
Self-Directed 401(k): How It Works (Solo vs. Employer Plans)
Most people think of a 401(k) as a menu of a dozen mutual funds picked by their employer's plan committee. A Self-Directed 401(k) works very differently. It lets you choose your own investments, including real estate, private companies, precious metals, and crypto, while keeping all the tax benefits of a 401(k). The catch is that how much freedom you actually get depends almost entirely on whether you have a Solo 401(k) for your own business or you're a participant in an employer plan, and I want to walk through exactly how each one works.
Key Takeaways
- A Self-Directed 401(k) lets you pick your own investments, including alternatives like real estate and private equity, inside a tax-advantaged plan.
- A Solo 401(k) is the most practical way to self-direct, and it's available only to business owners with no employees other than a spouse.
- For 2026, total Solo 401(k) contributions can reach $72,000, or up to $83,250 with catch-up contributions at ages 60 to 63.
- Employer plans rarely allow true self-direction; at best they offer a brokerage window limited to publicly traded securities.
- Both types are subject to prohibited transaction rules, but a 401(k) avoids UDFI tax on leveraged real estate in ways an IRA can't.
What Is a Self-Directed 401(k)?
A Self-Directed 401(k) is a 401(k) plan whose documents allow the participant, not a plan committee, to decide what the money is invested in. The tax treatment is the same as any 401(k): pre-tax contributions grow tax-deferred, and Roth contributions grow tax-free. What changes is the investment universe. Instead of a fixed fund lineup, a fully self-directed plan can hold:
- Residential and commercial real estate, including rental property and raw land
- Private equity, private loans, and promissory notes
- Precious metals such as IRS-approved gold and silver bullion
- Cryptocurrency
- Tax liens and tax deeds
- Traditional stocks, bonds, ETFs, and mutual funds
The tax code has always allowed these assets. What usually stands in the way is the plan itself. A big-company 401(k) is built for thousands of participants, so the plan sponsor limits investments to options it can monitor and defend as a fiduciary. That's why the type of plan you have matters so much.
How a Self-Directed Solo 401(k) Works
The Solo 401(k) is where self-direction really comes alive. Because you're both the employer and the only participant, you also get to decide what the plan document allows, and there's no committee of strangers second-guessing your investments.
Who Qualifies
The IRS describes a one-participant 401(k) as a plan covering a business owner with no employees, or that owner and a spouse. Sole proprietors, freelancers, consultants, and owners of single-member LLCs, S corporations, or partnerships with no common-law employees all fit. Once you hire employees who meet the plan's eligibility rules, you have to cover them, and the plan is no longer a Solo 401(k).
2026 Contribution Limits
This is where the Solo 401(k) leaves an IRA far behind. You contribute in two roles, as an employee through salary deferrals and as the employer through profit-sharing contributions. The IRS limits for 2026 are:
| 2026 limit | Under 50 | Age 50 to 59 and 64+ | Age 60 to 63 |
|---|---|---|---|
| Employee deferral | $24,500 | $32,500 | $35,750 |
| Total contributions (employee + employer) | $72,000 | $80,000 | $83,250 |
Total contributions can't exceed 100% of your compensation from the business, and the employer portion is generally capped at 25% of compensation (about 20% of net self-employment earnings for sole proprietors).
Checkbook Control
A well-designed Solo 401(k) names you as trustee of the plan, which means you can open a plan bank account and write checks for investments directly, with no custodian sign-off on each deal. When you find a rental property or a private loan opportunity, you can move on it the same day. That speed is the main reason real estate investors gravitate to the Solo 401(k).
Other Advantages
- Roth contributions. You can make Roth deferrals regardless of income, which isn't true of a Roth IRA.
- Participant loans. You can borrow up to $50,000 or 50% of your balance, whichever is less, and repay it over five years.
- Light reporting. No annual filing is required until plan assets reach $250,000 at year-end, after which you file Form 5500-EZ.
I started IRA Financial in 2010 after realizing how few retirement providers explained these options to self-employed clients. Today our Solo 401(k) costs $999 to set up and $399 a year, and that includes plan document updates, tax support from our in-house team, and Form 5500-EZ preparation. If you're weighing providers, I compare the options in Top Solo 401(k) Providers of 2026.
How Self-Direction Works in an Employer 401(k)
If you work for someone else, your options are much narrower. An employer that sponsors a 401(k) is a fiduciary under ERISA, responsible for every investment option it offers to every employee. Very few companies are willing to take on the risk of letting individual employees buy a rental house or a stake in a private company through the plan, so a fully self-directed employer plan is rare.
Brokerage Windows
What many larger plans offer instead is a self-directed brokerage account, often called a brokerage window. It lets you move part of your balance out of the core fund lineup and into a wider range of publicly traded investments. A Department of Labor ERISA Advisory Council report describes these windows as giving access to individual stocks, mutual funds, bonds, ETFs, and sometimes options. The same report cites recordkeeper data showing 20% to 46% of plans offer one, depending on the provider, but only about 2.9% of eligible participants actually use it.
Book a free call with a self-directed retirement specialist
- Review your self-directed retirement options
- Learn about investing in alternative assets
- Get all of your questions answered
A brokerage window is a real step up from a 10-fund menu, but it's still limited to the public markets. You won't be buying real estate, private equity, or physical gold through it.
Your Options After You Leave
The more practical route for most employees is what they do when they change jobs or retire. Once you've separated from service, you can generally roll that old 401(k) into a Self-Directed IRA, or into a Solo 401(k) if you have self-employment income, and gain full control over how the money is invested. Our Solo 401(k) page shows what rolled-over money can be invested in once it's in a plan you control.
Solo 401(k) vs. Employer 401(k): Side-by-Side Comparison
| Feature | Self-Directed Solo 401(k) | Employer 401(k) |
|---|---|---|
| Who can use it | Business owners with no employees other than a spouse | Employees whose company sponsors a plan |
| Investment choices | Real estate, private equity, notes, metals, crypto, plus public securities | Core fund menu; brokerage window if offered |
| Who picks investments | You, as trustee | Plan committee, with limited participant choice |
| Checkbook control | Yes | No |
| 2026 total contribution limit | $72,000 ($80,000 at 50+, $83,250 at 60 to 63) | Same overall limit, but your share depends on employer match |
| Roth contributions | Yes, if the plan allows | Only if the employer adds a Roth option |
| Participant loans | Yes, up to $50,000 or 50% of balance | Only if the employer allows them |
| Annual filing | Form 5500-EZ once assets reach $250,000 | Handled by the employer |
Rules That Apply to Every Self-Directed 401(k)
Prohibited Transactions
Self-direction gives you freedom over what the plan buys, not freedom to use the plan for personal benefit. Under Internal Revenue Code Section 4975, the plan can't do business with disqualified persons, which include you, your spouse, your parents and grandparents, your children and grandchildren and their spouses, and companies you control. In practice that means the plan can't buy property you already own, lend money to your son, or own a vacation home you stay in. Every expense on a plan-owned property has to be paid from the plan, and every dollar of income has to go back into it. Breaking these rules can disqualify the plan, so this is the area where I tell clients to slow down and ask questions first.
The UDFI Advantage Over an IRA
One technical point matters a great deal to real estate investors. When a Self-Directed IRA buys property with a non-recourse mortgage, the portion of income tied to that debt is treated as unrelated debt-financed income (UDFI), and the IRA can owe tax on it. IRS Publication 598 confirms that IRAs are subject to the tax on unrelated business income. A 401(k) is a qualified plan, and Section 514(c)(9) carves out real property debt held by qualified plans, so a Solo 401(k) can generally use a non-recourse loan to buy real estate without triggering UDFI. If you plan to use leverage, that difference alone can make the Solo 401(k) the better vehicle. Income from actively running a business through the plan is still taxable as unrelated business income in either account.
Final Thoughts
If you have any self-employment income, even a side consulting business, a Self-Directed Solo 401(k) is one of the most flexible retirement accounts the tax code allows. You get high contribution limits, checkbook control, Roth options, loans, and a real estate advantage an IRA can't match. If your only plan is through an employer, use the brokerage window if it's there, and keep in mind that the money you leave behind at a former job doesn't have to stay in a fund menu forever. Either way, the decision about where your retirement savings go should ultimately be yours.
This content is for educational purposes only and does not constitute legal, tax, or investment advice. Consult a qualified professional before making any investment decisions.
Best Ways to Fund a Small Business Startup in 2026
Ask ten founders how they paid for their first year and you'll hear about credit cards, a relative's check, and a bank that wanted three years of tax returns from a company that didn't exist yet. The best ways to fund a small business startup in 2026 still include those familiar options, but the one most people overlook is the money already sitting in an old 401(k) or IRA. I've worked with retirement accounts as a tax attorney for more than 25 years, and below I walk through each major funding route, including how to put retirement savings to work without a tax bill or a penalty.
Key Takeaways
- Personal savings and family money fund most startups, but they put your safety net or your relationships on the line.
- SBA 7(a) loans go up to $5 million, though a brand-new business with no revenue can struggle to qualify.
- Cashing out a 401(k) before age 59½ usually means income tax plus a 10% additional tax.
- A ROBS lets you roll retirement savings into your own C corporation with no tax, no penalty, and no debt.
- A Self-Directed IRA can invest in someone else's startup, but not in a business you run yourself.
Comparing the Best Ways to Fund a Small Business Startup
Every funding source trades something away, whether that's ownership, monthly cash flow, or a piece of your retirement. This is how the main options stack up side by side.
| Funding source | Creates debt? | Gives up ownership? | Biggest drawback |
|---|---|---|---|
| Personal savings | No | No | Drains your emergency cushion |
| Friends and family | Sometimes | Sometimes | Strains relationships if the business struggles |
| SBA or bank loan | Yes | No | Hard to qualify with no operating history |
| Angel or venture investors | No | Yes | Most small businesses aren't a fit for venture returns |
| 401(k) loan | Yes, to your own plan | No | Capped at $50,000 and due within five years |
| 401(k) cash-out | No | No | Income tax plus a 10% additional tax if under 59½ |
| ROBS | No | No, you own the company through your plan | Annual compliance and C corporation requirement |
| Self-Directed IRA investment | No | No, you're the investor | Can't be used for a business you run |
Traditional Startup Funding Options
Personal Savings and Friends and Family
Most founders start with their own checking account, and there's a lot to like about it. You don't owe anyone, you don't give up equity, and you can move as fast as you want. The risk is that the same money is often your emergency fund, so one slow quarter can put your household in a bind. Money from friends and family carries a different cost. I've seen plenty of these arrangements work, but the ones that go well are written down with clear terms, whether it's a loan with a repayment schedule or an equity stake with real paperwork behind it.
SBA and Bank Loans
The U.S. Small Business Administration doesn't lend money directly. It guarantees part of loans made by approved lenders, which makes banks more willing to work with small businesses. The flagship 7(a) program goes up to $5 million, and SBA microloans cover amounts of $50,000 or less. The catch for a true startup is underwriting. Lenders still want to see a credit history, a business plan they believe, and usually some of your own money in the deal. A company with no revenue yet is a harder sell than an existing business looking to expand.
Angel and Venture Investors
Outside investors make sense for a narrow slice of businesses, usually ones built to scale quickly and sell or go public. If you're opening a franchise, a restaurant, a contracting firm, or a professional practice, you're unlikely to be what a venture fund is looking for, and giving up a meaningful share of ownership for early cash can cost you far more over the life of the business than a loan would.
Why Cashing Out or Borrowing From Your 401(k) Usually Falls Short
When founders realize they have retirement money, the first instinct is to withdraw it. That's almost always the most expensive way to use it. A distribution is taxed as ordinary income, and if you're under age 59½, the IRS generally adds a 10% additional tax on early distributions. Between federal tax, state tax, and that 10%, a $150,000 withdrawal can easily leave you with far less to actually spend on the business.
A 401(k) loan avoids the tax hit, but it's small and rigid. Under the IRS plan loan rules, you can generally borrow the lesser of $50,000 or 50% of your vested balance (or up to $10,000 if half your balance is less than that), and you have to repay it in substantially equal payments at least quarterly over five years. Miss those payments and the unpaid balance is treated as a taxable distribution. There's also a practical problem: many plans only offer loans to current employees, so if the 401(k) is from a job you've already left, a loan may not be available at all.
Using a ROBS to Fund Your Startup With Retirement Savings
A Rollover for Business Startups, or ROBS, is the option I wish more founders knew about. It lets you move eligible retirement savings into a business you own and operate without taking a distribution, so there's no income tax, no early withdrawal penalty, and no loan to pay back. The structure relies on exemptions in the Internal Revenue Code and ERISA that allow a qualified retirement plan to buy stock in the company that sponsors it. The IRS has said that ROBS arrangements are not considered abusive tax avoidance transactions, though it watches how they're operated.
How a ROBS Works
- You form a new C corporation for the business.
- The C corporation adopts a 401(k) plan.
- You roll eligible savings from a traditional IRA, SEP IRA, SIMPLE IRA, old 401(k), or 457(b) plan directly into the new plan. Roth IRAs aren't eligible.
- The plan buys newly issued stock in your C corporation.
- The corporation deposits that cash in its business bank account and uses it for real business expenses, such as build-out, equipment, inventory, payroll, real estate, or franchise fees.
Unlike a Self-Directed IRA investment, a ROBS lets you work in the business and pay yourself a reasonable salary. That's what makes it a fit for someone buying a franchise or opening a shop they plan to run every day. I go deeper on the mechanics in How Does ROBS Work?
The Compliance You Sign Up For
The rollover itself is the easy part. The ongoing obligations are where people get into trouble. The IRS has been clear that a ROBS plan must file Form 5500 every year, because the plan, not you personally, owns the business, so the usual one-participant filing exception doesn't apply. The company stock also has to be valued each year, and once you hire employees, the 401(k) has to be made available to them on the same terms. The IRS compliance project flagged plans that were amended to block new participants from buying stock as a qualification problem. Skip these steps and a legal funding strategy can unravel into a taxable distribution.
Book a free call with a self-directed retirement specialist
- Review your self-directed retirement options
- Learn about investing in alternative assets
- Get all of your questions answered
This is why I'd never set one up without a provider that handles the administration. At IRA Financial, our in-house ROBS specialists handle the plan setup and ongoing compliance for a flat $3,500 setup fee and $1,200 a year, with no fee tied to how much you roll over. You can see the details on our ROBS 401(k) page, and I lay out the trade-offs honestly in ROBS 401(k) Pros and Cons.
Backing Someone Else's Startup With a Self-Directed IRA
Retirement money can fund startups from the investor side too. A Self-Directed IRA can buy shares or a convertible note in a private company, and if that company takes off, the growth stays inside a tax-advantaged account. The rule to respect is the prohibited transaction rules. You can't use your IRA for a business you run, work for, or otherwise benefit from personally, which is exactly why a ROBS exists for founders and a Self-Directed IRA works better for passive investors.
The upside can be remarkable. One of our clients, Danny, put $5,500 of his Self-Directed IRA into a startup, and that stake grew to $13.5 million. Results like that are rare, and most early-stage investments don't pan out, so I'd never suggest putting a large share of your retirement into a single private company. For investors who want this kind of exposure, IRA Financial charges a flat $495 annual fee for a Self-Directed IRA, with no fees that rise with your account value. I cover the structure in more detail in How to Fund a New or Existing Business with a Self-Directed IRA.
Final Thoughts
There's no single right answer for every founder. Many of the strongest small businesses I've seen were funded with a mix, some personal savings, an SBA loan for equipment or real estate, and retirement funds rolled in through a ROBS to avoid taking on more debt than the business can carry in its first year. What matters is knowing every option before you sign a personal guarantee or take a taxable withdrawal you can't undo. Your retirement savings are a real asset, and with the right structure they can build something you own today while still sitting inside a retirement plan.
This content is for educational purposes only and does not constitute legal, tax, or investment advice. Consult a qualified professional before making any investment decisions.
The Peter Thiel Roth IRA Playbook: How Ordinary Americans Can Use the Same Tax-Free Strategy
The Peter Thiel Roth IRA has become one of the most famous examples of what can happen when an investor combines an extraordinary investment with an extraordinary tax structure. Most people know Thiel as the billionaire who co-founded PayPal and Palantir and became one of the earliest outside investors in Facebook. From my perspective as a tax lawyer, however, the most interesting part of his story isn't only the investments he made. It's where he made some of them.
Key Takeaways
- According to ProPublica, Thiel's Roth IRA grew from less than $2,000 in 1999 to roughly $5 billion by 2019.
- He didn't contribute billions; he placed low-value, high-growth private investments inside a Roth and let appreciation do the work.
- A Self-Directed Roth IRA can hold real estate, private businesses, and other alternative assets that most brokerages won't offer.
- IRA-owned real estate must be a true investment, since IRC Section 4975 bars you from personally using the property.
- High earners can still reach Roth treatment through a Backdoor Roth IRA or a Roth conversion, which has no income limit.
Peter Thiel, Casa Encantada, and the Investor Mindset
Thiel reportedly used his Roth IRA to acquire very inexpensive shares of early-stage private companies before those companies became enormously valuable. That story has always fascinated me because it shows something about the Roth IRA that most Americans still don't appreciate. If used properly, a Roth IRA can be one of the most powerful tax-free investment vehicles available under the Internal Revenue Code.
A recent Wall Street Journal story brought this concept back to mind. According to the Journal, Thiel was behind the $130 million purchase of Casa Encantada, a roughly 40,000-square-foot estate on about 8.5 acres in Bel-Air, acquired at a foreclosure auction through an LLC associated with him. The most interesting detail to me was that Thiel reportedly doesn't intend to live in the house. He views the property as an investment and plans to renovate it.
There's no public evidence that Thiel purchased Casa Encantada through his Roth IRA, and I'm not suggesting that he did. But the transaction reminded me of the philosophy behind his famous Roth IRA strategy: invest in assets with significant long-term appreciation potential, and combine that with the tax advantages of a Roth.
How Peter Thiel Built a $5 Billion Roth IRA
The origins of the Peter Thiel Roth IRA go back to the early days of PayPal. According to ProPublica's reporting, Thiel acquired approximately 1.7 million founder shares of the company that became PayPal through his Roth IRA in 1999, for roughly $1,700, or about one-tenth of a cent per share. At the time, those shares were highly speculative, and they had little value because the company was still at a very early stage. That's exactly what made the Roth IRA so powerful.
As PayPal grew, the appreciation occurred inside Thiel's Roth. ProPublica reported that the account grew from less than $2,000 in 1999 to approximately $3.8 million by the end of 2000. By the end of 2002, the year eBay acquired PayPal, it was worth roughly $28.5 million. Thiel then redeployed that capital inside the Roth into additional investments, and reporting has connected his Roth IRA to companies such as Palantir and Facebook. By 2019, ProPublica reported that the account had reached approximately $5 billion.
| Year | Reported Roth IRA value |
|---|---|
| 1999 | Less than $2,000 |
| 2000 | About $3.8 million |
| 2002 | About $28.5 million |
| 2019 | About $5 billion |
The most important point is that Thiel didn't contribute $5 billion to a Roth IRA. He couldn't have, because Roth contribution limits are relatively small. Instead, he placed investments with extraordinary appreciation potential inside a Roth when those investments had relatively low values, and the appreciation did the rest. That's the Peter Thiel Roth IRA playbook in its simplest form.
Why the Roth IRA Can Be So Powerful
The basic tax concept behind a Roth IRA is surprisingly simple. You generally don't receive a deduction for a Roth contribution because it's made with after-tax dollars. In exchange, future earnings and appreciation can be distributed tax-free if the requirements for a qualified distribution are satisfied. Generally, that means the five-year requirement has been met and the distribution occurs after age 59½, although the tax law provides certain other circumstances that can produce qualified distributions.
This creates an enormously attractive opportunity for long-term investors. If I place $10,000 into a Roth IRA investment and it becomes worth $20,000, the tax savings are useful. If that same $10,000 becomes worth $500,000 or $1 million, the value of the Roth structure becomes dramatically more important. Thiel simply demonstrated the concept at an almost unimaginable scale.
His story also shows why investors should think about more than how much they can contribute each year. Contributions matter, but investment selection and asset location can be equally important. You should also think about which investments you want growing inside your Roth.
The Self-Directed IRA Is the Missing Part of the Story
There's another aspect of the Thiel story that often gets overlooked. He didn't build his enormous Roth IRA by purchasing publicly traded stocks or mutual funds. He used private-company investments, and that's where the Self-Directed IRA becomes so important.
Most Americans have been conditioned to believe an IRA is essentially a brokerage account. They open one at a large financial institution, get offered stocks, bonds, mutual funds, and ETFs, and naturally assume those are the only investments an IRA can legally own. A Self-Directed IRA operates under the same general IRA tax rules. The principal difference is that a Self-Directed IRA custodian is willing to administer alternative investments, which, depending on the structure, can include real estate, private businesses, private equity, venture capital, investment funds, certain precious metals, and other alternative assets.
This is what makes a Thiel-style strategy possible. If you want to use retirement money to invest in an early-stage business, a private fund, or investment real estate, you generally need a provider willing and able to custody or administer that asset. These opportunities have existed for decades. Most Americans have simply never been told about them, which is a big part of why I started IRA Financial in 2010.
Why Aren't Self-Directed IRAs Better Known?
I've worked in the self-directed retirement industry for more than two decades, and this remains one of the most frustrating aspects of our retirement system. The IRA has existed for more than 50 years, yet many Americans still believe their retirement account is legally limited to stocks, bonds, and mutual funds.
In my view, much of this comes down to economics. Large banks and brokerage firms have built very successful businesses around products they can efficiently custody, trade, and monetize. Investment real estate doesn't fit that model, and neither does a private business or a venture capital investment. There are also legitimate administrative, valuation, compliance, and liquidity issues with alternative investments, which helps explain why many institutions choose not to offer them.
The result is that many investors confuse the investment menu offered by their financial institution with the investment rules imposed by Congress. Your brokerage firm determines which investments it's willing to offer you. The Internal Revenue Code determines the legal boundaries of what your IRA can own.
Could a Self-Directed Roth IRA Own Real Estate Like Casa Encantada?
Again, there's no public evidence that Peter Thiel used his Roth IRA to acquire Casa Encantada. However, I wouldn't be surprised if he did. If I had to bet, I'd bet he used Roth IRA funds for at least some part of the investment. He reportedly has an enormous Roth IRA, a long history of using it for investments with significant appreciation potential, and Casa Encantada is reportedly being acquired as an investment rather than a personal residence. From a tax-planning standpoint, it's exactly the type of asset that makes a Self-Directed Roth IRA so attractive.
Of course, that's my speculation based on his publicly reported investment history, not a statement that his Roth IRA owns the property. What we do know is that a properly structured Self-Directed Roth IRA can own investment real estate. The important word is "investment."
An IRA can't purchase a house so that the IRA owner can live in it. The prohibited transaction rules under Internal Revenue Code Section 4975 generally prevent an IRA owner and certain other disqualified persons from personally using or benefiting from IRA-owned property. If your Self-Directed Roth IRA buys a beachfront home, you can't spend your summer vacation there. If it buys a condominium in Miami, you can't use it for a weekend. Paying fair-market rent wouldn't necessarily solve the problem either, because the issue is the transaction between the IRA and a disqualified person.
That's why the Casa Encantada detail caught my attention. Thiel reportedly views the property as an investment, which illustrates the distinction between buying real estate for personal use and buying it because you believe it's an attractive investment. That distinction is fundamental in the Self-Directed IRA world, and I cover the mechanics in more detail in my guide to using your IRA to buy a rental property.
You Don't Have to Be Peter Thiel to Get Money Into a Roth
Another misconception I regularly hear is that higher-income Americans can't have Roth IRAs. The tax law does impose income limitations on direct Roth IRA contributions, but that doesn't mean a higher-income taxpayer is locked out of the Roth world.
The Backdoor Roth IRA strategy can allow a high-income taxpayer to make a nondeductible contribution to a Traditional IRA and then convert those funds to Roth. Anyone considering it must be aware of the IRA aggregation and pro-rata rules, particularly if they already have pre-tax Traditional, SEP, or SIMPLE IRA assets.
Book a free call with a self-directed retirement specialist
- Review your self-directed retirement options
- Learn about investing in alternative assets
- Get all of your questions answered
There's also a much larger opportunity through Roth conversions. There's generally no income limitation on converting eligible pre-tax IRA funds to Roth. The converted amount that hasn't previously been taxed is generally included in taxable income for the year of conversion. In other words, you voluntarily pay income tax today in exchange for moving money into the Roth environment.
The Best Time to Think About a Roth Conversion
I don't believe everyone should automatically convert all of their pre-tax retirement savings to Roth. A Roth conversion is a tax transaction, and it needs to be analyzed carefully. These are the four questions I look at.
- What is the asset worth today? If an investment has fallen significantly in value but I remain extremely bullish on its long-term prospects, that may create an attractive conversion opportunity. A lower valuation means less taxable income today, while future appreciation can occur inside the Roth.
- How strongly do you believe in its future appreciation? The Roth becomes more valuable when the underlying investment performs exceptionally well. If an asset could increase fivefold or tenfold over a long period, paying tax on today's lower value may look very attractive years later.
- Can you afford the tax? A conversion can generate a significant current tax liability. In many situations, it's better to pay the tax with personal funds outside the retirement account so more retirement money stays invested.
- How does your current tax rate compare with your expected future rate? Nobody knows where tax rates will be 10, 20, or 30 years from now. If you believe your future rate will be the same or higher, paying tax today becomes more attractive.
I've personally followed this strategy. I converted pre-tax retirement funds to Roth over a period of years because I wasn't in a position to pay the tax on converting the entire balance in a single year. Spreading the conversions out let me gradually move assets into Roth while managing the tax liability, and it taught me that Roth planning doesn't have to be an all-or-nothing decision.
I Followed the Thiel Playbook Myself
My results are nowhere near Peter Thiel's reported $5 billion Roth IRA. However, the basic strategy behind his success has influenced how I've managed my own retirement investments.
As a tax lawyer, I look at every investment through two lenses. The first is how much the investment could potentially earn. The second is how much of that return I'll actually keep after taxes. Over the years, I've used self-directed retirement structures to invest in real estate, Bitcoin, and several private businesses. My objective wasn't to find the next PayPal. It was to identify investments I believed had substantial long-term appreciation potential and, whenever appropriate, hold them in a Roth structure.
Following that philosophy helped me become a tax-free retirement millionaire in my mid-40s. It's also one of the reasons I'm so passionate about educating Americans about Self-Directed Roth IRAs. I've seen firsthand how powerful the combination of alternative investments and Roth tax treatment can be.
Final Thoughts: The Thiel Strategy Is Available to Ordinary Americans
The biggest lesson from Peter Thiel's Roth IRA shouldn't be that billionaires have access to some magical retirement account ordinary Americans can't use. The Roth IRA rules are part of the same Internal Revenue Code that applies to everyone.
Very few people will ever replicate Thiel's results. Finding an early-stage PayPal, Facebook, or Palantir is extraordinarily difficult, and private investments involve substantial risk. But you don't need to turn $2,000 into $5 billion for the strategy to have a meaningful impact on your retirement. Imagine investing $25,000 of Roth money into a private company that eventually becomes worth $250,000, or buying investment real estate inside a Self-Directed Roth IRA that appreciates significantly over 20 years. The numbers don't need to reach billions before the tax benefits become significant.
The broader lesson is to think about your Roth IRA as a long-term investment vehicle, one where your most successful investments can compound for decades without annual taxation and ultimately be distributed tax-free if the qualified distribution requirements are met. Thiel acquired investments when their values were low, placed some of them inside a Roth, let the appreciation happen in that tax-advantaged environment, and kept reinvesting.
For me, that's the most important lesson of the Peter Thiel story. The goal shouldn't be to become Peter Thiel. It should be to understand what he understood very early: when you believe an investment has significant long-term appreciation potential, where you own it can be almost as important as what you own. And when that investment can legally and appropriately be held inside a Self-Directed Roth IRA, the potential tax benefits can last a lifetime.
This content is for educational purposes only and does not constitute legal, tax, or investment advice. Consult a qualified professional before making any investment decisions.
How Do I Roll Over My 401(k) Into a Gold IRA in 2026?
You can roll over a 401(k) into a Gold IRA without paying taxes or penalties, as long as the money moves by direct rollover into a Self-Directed IRA and the metals meet IRS purity and storage rules. The IRS side is manageable. Where people get hurt is everything around the rollover: dealers pushing marked-up coins, custodians charging fees that grow with your balance, and promoters selling home storage setups the Tax Court has already rejected. Below, I'll walk through how a 401(k) to Gold IRA rollover works in 2026, step by step, and where investors lose money along the way.
Key Takeaways
- You can roll over a 401(k) into a Gold IRA tax-free, usually after you leave the employer that sponsors the plan.
- A direct rollover avoids the 20% mandatory withholding and the 60-day deadline that come with an indirect rollover.
- A "Gold IRA" is really a Self-Directed IRA that holds IRS-approved bullion or coins meeting strict fineness standards.
- • The metals must be held by a bank or approved trustee, and storing IRA gold at home can trigger a taxable distribution.
- • Dealer markups and asset-based custodian fees can quietly cost you more than the gold earns, so compare total costs before you buy.
What Is a Gold IRA, Really?
There's no special account type in the tax code called a "Gold IRA." It's a marketing term. What people mean is a Self-Directed IRA that holds physical precious metals, and the same account can just as easily hold real estate, private equity, or crypto. Your 401(k) at work almost certainly can't buy physical gold, because plan sponsors limit you to a menu of mutual funds and target-date funds. A Self-Directed IRA removes that restriction.
I learned this firsthand back in 2008. A client asked me whether his retirement account could invest in something other than stocks, so I went to the law library and had the answer in about two hours. The tax code is far more flexible than Wall Street lets on, and that discovery is what led me to start IRA Financial.
The gold itself has to meet specific IRS rules, which I'll cover below, but the account structure is the same as any other traditional or Roth IRA. Pre-tax 401(k) dollars go into a traditional Self-Directed IRA, and Roth 401(k) dollars go into a Roth Self-Directed IRA. If you send pre-tax money into a Roth, the IRS treats it as a Roth conversion and you'll owe income tax on it, so make that choice deliberately.
How to Roll Over a 401(k) Into a Gold IRA, Step by Step
The process to roll over a 401(k) into a Gold IRA is simpler than most dealers make it sound. Here's how I walk clients through it.
- Confirm your 401(k) is eligible. Most plans only allow a rollover once you've separated from the employer, though some permit in-service rollovers at age 59½. Old 401(k)s from former jobs are almost always eligible. Call the plan administrator and ask.
- Open a Self-Directed IRA with a custodian that allows precious metals. Make sure the account type matches your money, traditional for pre-tax dollars and Roth for Roth dollars.
- Request a direct rollover. Tell your 401(k) administrator you want a direct rollover to your new Self-Directed IRA custodian. The check should be payable to the custodian for your benefit, not to you personally.
- Choose your metals and a dealer. Pick IRS-approved bullion or coins and get quotes from more than one dealer. The price you pay over spot is where most of the cost hides.
- Direct the custodian to buy. Your custodian pays the dealer from the IRA. You never touch the money or the metal.
- Ship to an approved depository. The dealer ships the metals straight to an IRS-approved depository, where they're held in your IRA's name.
If you're rolling over a 401(k) from a job you just left, my guide on what to do with your 401(k) when changing jobs covers the other options worth weighing before you move the money.
Direct Rollover vs. Indirect Rollover
This is where people get hurt. With a direct rollover, your 401(k) administrator sends the money straight to your new custodian, and nothing is withheld. With an indirect rollover, the plan cuts a check to you, and under IRS rules the plan must withhold 20% for federal taxes, even if you fully intend to roll it over.
Book a free call with a self-directed retirement specialist
- Review your self-directed retirement options
- Learn about investing in alternative assets
- Get all of your questions answered
That 20% creates a real problem. To roll over the full balance, you have to come up with the withheld amount out of pocket and deposit everything within 60 days. Say you have $200,000 in your 401(k). The plan sends you $160,000. If you only deposit the $160,000, the missing $40,000 is treated as a taxable distribution, and if you're under 59½, it can also carry a 10% early withdrawal penalty. You'll recover the withholding as a credit when you file, but that doesn't undo the tax on the portion you didn't replace.
| Direct rollover | Indirect rollover | |
|---|---|---|
| Who receives the money | Your new IRA custodian | You |
| 20% mandatory withholding | No | Yes |
| 60-day deadline | Doesn't apply | Must redeposit within 60 days |
| Risk of taxes and penalties | Very low | High if you miss the deadline or can't replace the 20% |
| My recommendation | Use this | Avoid unless you have no choice |
One more point. The IRS one-rollover-per-year rule applies to IRA-to-IRA rollovers, not to rollovers from a 401(k) to an IRA, so a plan-to-IRA rollover doesn't count against that limit. For a deeper look at the mechanics, see my post on the Self-Directed IRA rollover rules.
IRS Rules for the Gold in Your IRA
Under Internal Revenue Code Section 408(m), most collectibles are off limits for an IRA, and buying one is treated as a taxable distribution of the purchase price. The IRS carves out an exception for certain U.S. government coins and for gold, silver, platinum, and palladium bullion that meets a minimum fineness, as long as a bank or approved non-bank trustee keeps physical possession of it.
IRS-approved gold and other metals
In practice, the fineness standards work out to the following.
| Metal | Minimum fineness | Notes |
|---|---|---|
| Gold | .995 | The American Gold Eagle is allowed despite being below .995 |
| Silver | .999 | Older 90% U.S. silver coins don't qualify |
| Platinum | .9995 | |
| Palladium | .9995 |
That means popular items like Krugerrands and pre-1933 gold coins don't qualify, no matter what a dealer tells you about their rarity. Rare and numismatic coins are where some dealers make their biggest margins, and they're generally collectibles in the eyes of the IRS.
The home storage Gold IRA myth
I still see ads promising a "home storage Gold IRA." The pitch usually involves setting up an IRA LLC and keeping the coins in your safe at home. The U.S. Tax Court shut this down in McNulty v. Commissioner, 157 T.C. No. 10 (2021). The taxpayers bought American Eagle coins through an IRA LLC and stored them at home, and the court held that taking personal possession of IRA assets was a taxable distribution, with penalties on top. I'm a big believer in checkbook control for real estate and other alternative assets, but precious metals belong in an approved depository.
Gold IRA Fees: Where the Real Cost Hides
A 401(k) to Gold IRA rollover involves three layers of cost, and most people only look at one of them.
- Dealer markup. This is the premium you pay above the spot price of gold. It varies widely by product and dealer, and it's usually the biggest cost in the whole transaction. Bullion bars and common coins carry much lower premiums than "limited edition" or proof coins.
- Depository storage. The depository charges an annual fee to store and insure your metals, and it can be a flat amount or a percentage of the metal's value. Ask whether storage is segregated or commingled, since segregated storage typically costs more.
- Custodian fees. Many custodians charge a percentage of assets or a fee per asset held. As your gold appreciates, an asset-based fee grows right along with it.
I've always thought asset-based fees make little sense for alternative investments. The custodian doesn't do any more work because your gold went up in value. That's why IRA Financial charges a flat $495 annual fee for a Self-Directed IRA, with no setup fee, no transaction fees, and no asset-valuation fees, whether you hold $50,000 or $5 million in metals. You can see how that plays out over a decade in my breakdown of flat-fee vs. asset-based custodian fees.
Before you buy, get the dealer's price per ounce in writing, compare it against the current spot price, and ask for a buyback quote too. A dealer who won't give you a clear buyback price is telling you something.
Is a Gold IRA Rollover Right for You?
Gold doesn't pay dividends or rent, so its job in a retirement account is diversification and a hedge against inflation and currency risk, not income. For most people I talk to, a sensible approach is allocating a slice of retirement savings to precious metals rather than moving an entire 401(k) into gold. A Self-Directed IRA lets you hold gold alongside real estate, private businesses, or traditional stocks, so you're not forced into an all-or-nothing choice.
It's also worth thinking about timing. If you're still working for the employer that sponsors your 401(k), you may not be able to roll it over yet, and if you're self-employed, a Solo 401(k) may be a better home for alternative assets because of its higher contribution limits.
Final Thoughts
Rolling over a 401(k) into a Gold IRA is one of the more common moves I see, and it's entirely tax-free when it's done correctly. Use a direct rollover, buy only IRS-approved metals, keep them in an approved depository, and look hard at the total cost before you commit. Gold can play a useful role in a retirement portfolio, and with the right structure, you get to decide how big that role should be.
The Hidden 401(k) Trick That Could Help You Escape Credit Card Debt
Americans have a credit card problem. According to the Federal Reserve Bank of New York, U.S. credit card balances reached approximately $1.26 trillion in the second quarter of 2026, up $21 billion in just three months. Even more concerning, new credit card delinquencies remain elevated.
But the amount of credit card debt is only part of the problem, the bigger issue is the interest rate. It's not unusual for someone carrying credit card debt to be paying an annual percentage rate of 20%, 25%, or even higher. At those rates, getting out of debt can become incredibly difficult because so much of every monthly payment goes toward interest rather than principal.
For millions of Americans with money sitting in a 401(k), however, there may be another option that doesn't get nearly enough attention. It's called a 401(k) loan, and it can potentially allow you to replace credit card debt charging 25% interest with a loan from your own retirement account charging a much lower rate. Better yet, the interest you pay generally goes back into your own 401(k) account.
Key Takeaways
- Credit card debt at 25% APR can trap even disciplined borrowers, a $12,000 balance paid at $300 a month takes roughly seven years and costs about $14,000 in interest.
- A 401(k) loan lets you borrow the lesser of $50,000 or 50% of your vested balance, generally for any purpose, including paying off credit cards.
- With the bank prime rate at 7.00% as of September 2026, a $12,000 401(k) loan can cost roughly $6,900 less in interest than carrying the same balance on a 25% credit card.
- IRAs, SEP IRAs, and SIMPLE IRAs cannot offer participant loans, only 401(k) plans, including Solo 401(k)s for the self-employed, can.
- The strategy only works if you stop adding new charges, using a 401(k) loan to pay off cards you then run back up doubles the problem instead of solving it.
I've always viewed the 401(k) primarily as one of the best wealth-building tools available to Americans, and I generally don't like taking money out of retirement accounts early. Retirement money should ideally remain invested and compound for decades. But I also believe there are circumstances where a 401(k) loan can make financial sense, and paying off high-interest credit card debt may be one of them.
Why Credit Card Debt Is So Difficult to Escape
Consider someone with $12,000 of credit card debt at a 25% interest rate. Twenty-five percent of $12,000 is $3,000, which means, roughly speaking, the borrower is facing about $250 of interest in the first month alone before making meaningful progress on the principal. This is why minimum payments can feel like a treadmill.
Assume our borrower pays $300 per month and never charges another dollar to the card. At a 25% interest rate, it would take roughly 87 months, or more than seven years, to eliminate the debt. Total payments would be approximately $26,000, meaning the borrower would pay roughly $14,000 of interest on a $12,000 debt. You borrowed $12,000, paid $300 every single month for more than seven years, and ultimately paid approximately $26,000.
Even increasing the payment to $400 per month doesn't make the interest disappear. It would still take roughly four years to eliminate the balance, with approximately $7,000 going toward interest. That's the danger of high-interest consumer debt. Compound interest, which is one of your greatest friends when you're investing, becomes one of your greatest enemies when you're borrowing.
The Hidden 401(k) Feature Most Americans Overlook
Most people think of a 401(k) as simply a retirement investment account. You contribute money, your employer may provide a match, the money gets invested, and hopefully it grows over time. But many 401(k) plans contain another extremely valuable feature: the ability to borrow from your account.
The IRS generally allows a participant to borrow up to the lesser of $50,000, or 50% of the participant's vested 401(k) account balance. There's a special rule potentially permitting loans up to $10,000 in certain cases even if that exceeds 50% of the vested balance, although plans aren't required to offer that feature. So, for example, if you have $40,000 vested in your 401(k), you could generally borrow up to $20,000. If you have $80,000, you could generally borrow up to $40,000. If you have $150,000, you'd generally be limited to $50,000.
For most loans, repayment must occur within five years through substantially level payments made at least quarterly. A longer repayment period may be available when the loan is used to purchase a principal residence.
And here's another important feature: a 401(k) loan can generally be used for any purpose permitted under the plan. You don't need to prove a medical emergency, you don't need to be buying a home, and you don't need to show financial hardship. That means the money can potentially be used to pay off credit cards.
401(k) Loans Are More Common Than You May Think
This isn't some obscure provision of the tax code that nobody uses. Vanguard reported that in 2024, 80% of its defined contribution plans permitted participant loans, a share that's likely even higher when measured by participants rather than plans, since larger plans are more likely to offer the feature. Among participants in plans offering loans, approximately 13% had a loan outstanding, with an average loan balance of roughly $11,000.
Separate research published by the Investment Company Institute in 2026 found that 63% of the 401(k) plans in its 2023 dataset allowed loans, covering 77% of participants. Among participants eligible to borrow, 15% had a loan outstanding. In other words, millions of Americans already use this strategy.
The interest rate is generally tied to a reasonable market rate. As of September 2026, the bank prime rate is 7.00%, after rising from 6.75% earlier in the month. There's no IRS rule requiring a specific formula like prime plus 1%, but Department of Labor guidance requires plan loans to carry a "reasonable rate of interest," and in practice that's almost always interpreted as at least the prime rate. That creates a potentially enormous difference compared with a credit card charging 25%.
Book a free call with a self-directed retirement specialist
- Review your self-directed retirement options
- Learn about investing in alternative assets
- Get all of your questions answered
Turning 25% Debt Into 7% Debt
Let's go back to our person with $12,000 of credit card debt. Instead of leaving the $12,000 on a card charging 25%, assume the individual has enough money in a 401(k), the plan permits loans, and the applicable loan rate is 7%.
The individual borrows $12,000 from the 401(k) and immediately pays off the credit card. Assuming a five-year amortization, the 401(k) loan payment would be approximately $238 per month, and over five years, total interest would be approximately $2,257. Compare that with financing the same $12,000 at 25% over five years, where the monthly payment would be approximately $352 and total interest would be approximately $9,133. That's a difference of almost $6,900 in interest expense.
There's also another major difference. The credit card interest goes to the credit card company, the 401(k) loan interest generally goes back into your own 401(k) account. That's one reason I think a 401(k) loan deserves serious consideration when the alternative is carrying extremely expensive credit card debt.
What About Larger Credit Card Balances?
The numbers become even more dramatic as the debt increases. Take someone with $20,000 of credit card debt. If that balance were amortized over five years at 25%, the payment would be approximately $587 per month and total interest would exceed $15,200. At 7%, a five-year loan would require a payment of approximately $396 per month and generate approximately $3,761 of interest. That's a difference of roughly $11,500.
Now consider $30,000. At 25% over five years, the monthly payment would be approximately $881, with total interest of roughly $22,800. At 7%, the monthly payment would fall to approximately $594, and total interest would be approximately $5,642. The difference is more than $17,000. Of course, your actual 401(k) rate may be higher than 7%, if the plan charges the common prime-plus-1% formula, the current rate would be 8%. But even 8% is dramatically lower than a 25% credit card rate.
Why a 401(k) Loan Can Make Sense for Credit Card Debt
Does this mean a 401(k) loan is automatically the right answer for everyone with credit card debt? Not necessarily. But if you're carrying credit card debt at 20%, 25%, or even higher rates, I believe a 401(k) loan can be one of the smartest tools available to help break that cycle. There are a few considerations to understand, but in my view, they need to be weighed against the very real cost of continuing to carry high-interest credit card debt.
First, money borrowed from your 401(k) will generally no longer be invested in the same assets while the loan is outstanding. That creates a potential opportunity cost if the market performs well. However, eliminating debt that's costing you 25% a year can provide a powerful and immediate financial benefit. There's no guarantee your investments will earn 25%, but the credit card company is essentially guaranteed to charge you that rate as long as you carry the balance.
Second, a 401(k) loan needs to be repaid according to the plan's terms. I actually view that structure as a positive for many borrowers. Instead of making minimum credit card payments that can stretch on for years, you have a defined repayment schedule, generally over five years, and the principal and interest payments go back into your own 401(k) account rather than to a credit card company.
Changing jobs is another issue to understand, since separation from employment can affect how a plan loan is handled. The rules provide certain protections and potential rollover opportunities, but anyone considering a loan should understand their particular plan terms before borrowing.
Finally, the most important part of the strategy is what happens after the credit cards are paid off. The real opportunity is to use the 401(k) loan as a financial reset: pay off the high-interest credit cards, avoid rebuilding those balances, make the required 401(k) loan payments, and redirect the money that was being lost to credit card interest toward rebuilding your financial future.
That's why I'm generally positive about using a 401(k) loan to eliminate high-interest credit card debt. Yes, retirement assets are valuable and should be protected. But paying 20% or 25% interest for years can also seriously damage your ability to build wealth. If a 401(k) loan allows you to replace 25% credit card debt with a loan closer to 7% or 8%, establish a five-year repayment schedule, and pay the interest back to your own retirement account, I believe that can be a very compelling trade.
You pay off the credit cards and then run the balances right back up. If you borrow $20,000 from your 401(k), pay off $20,000 of credit card debt, and then accumulate another $20,000 of credit card debt, you haven't solved the problem, you've doubled it. A 401(k) loan works best as part of a debt-elimination strategy, not as a way to create more spending capacity.
The Solo 401(k): A Powerful Option for the Self-Employed
There's another part of this strategy that I think is particularly interesting. If you're self-employed or own a business with no full-time employees other than a spouse, you may be able to establish a Solo 401(k). This can apply to consultants, independent contractors, freelancers, real estate professionals, doctors, attorneys, online business owners, gig workers, and countless other entrepreneurs. And you don't necessarily have to quit your day job.
For example, assume Sarah works full-time for a large company and participates in its 401(k). On the side, she earns legitimate self-employment income from a consulting business. The fact that Sarah has a full-time job doesn't automatically prevent her from establishing a Solo 401(k) for her separate business, assuming she satisfies the applicable eligibility requirements and doesn't have employees who must be covered. If the Solo 401(k) plan document permits participant loans, Sarah may also have access to the 401(k) loan feature.
Imagine Sarah has built a $60,000 balance in her Solo 401(k) and has accumulated $20,000 of credit card debt at 25%. Subject to the plan and loan rules, she could potentially borrow $20,000 from her Solo 401(k), pay off the credit card debt, and repay the loan to her own plan over five years at the required interest rate.
Or consider a small-business owner with $100,000 in a Solo 401(k) and $35,000 spread across several high-interest credit cards. The 50% rule would potentially give that owner access to as much as $50,000, subject to the other loan limitations. Instead of continuing to send thousands of dollars of high-rate interest to credit card companies every year, the business owner could potentially consolidate the credit card balances with one 401(k) loan and begin paying principal and interest back to their own retirement plan.
For the self-employed, I believe the loan feature is one of the most overlooked benefits of the Solo 401(k). One important distinction: you cannot do this with an IRA, SEP IRA, or SIMPLE IRA. The IRS specifically prohibits loans from IRAs and IRA-based plans, which makes the Solo 401(k) loan feature especially valuable for qualifying self-employed individuals.
Your 401(k) Is Still a Retirement Account
As a tax attorney who has spent much of my career focused on retirement accounts, my default position is simple: I want retirement money to stay in retirement accounts and compound. I don't view a 401(k) as an ATM. But personal finance is about comparing alternatives.
If your choice is between leaving $20,000 invested in your 401(k) while carrying $20,000 of credit card debt at 25%, or temporarily borrowing from the 401(k) at a much lower interest rate to eliminate the 25% debt, I think the second option deserves serious consideration. You're effectively replacing extremely expensive debt with substantially cheaper debt. And instead of paying all that interest to a bank or credit card company, the 401(k) loan interest is generally being paid back into your own retirement account. That can be a powerful difference.
The Bottom Line
Credit card debt has become a serious financial problem for millions of Americans. With U.S. credit card balances now exceeding $1.2 trillion and interest rates that can reach 20%, 25%, or more, even relatively modest balances can become incredibly difficult to eliminate.
A 401(k) loan isn't perfect. It carries risks. It can reduce the amount of retirement money exposed to market gains while the loan is outstanding. It must be properly documented and repaid. And it should never become an excuse to accumulate new credit card debt.
But when used responsibly, I believe it can be one of the most overlooked financial tools available to retirement savers. If you're paying 25% to a credit card company and have the ability to borrow from your 401(k) at something closer to 7% or 8%, it's worth doing the math. For the self-employed, the Solo 401(k) can make the strategy even more interesting by combining high retirement contribution opportunities, investment flexibility, and access to the participant loan feature.
The 401(k) was designed to help Americans build wealth for retirement. Sometimes, one of the best ways to protect your future wealth is to stop paying 25% interest today.
This content is for educational purposes only and does not constitute legal, tax, or investment advice. Consult a qualified professional before making any investment decisions.
How Regulatory Capture Changed the Way Americans Retire
But there is a problem with that assumption: the law never said Americans had to invest their retirement money that way.
Key Takeaways
- Congress never restricted IRAs to publicly traded securities, real estate, private businesses, and other alternative assets have always been legally permitted.
- Regulatory capture explains how well-intentioned rules can still end up favoring the largest, best-resourced institutions.
- Wall Street built its infrastructure around assets that were easy to price, trade, and administer, not because the law required it.
- Accredited investor rules, in place in their modern form since 1982, effectively made wealth itself a prerequisite for access to private markets.
- A Self-Directed IRA operates under the same tax code as a brokerage IRA, the difference is which assets the custodian is willing to hold.
When Congress passed ERISA in 1974 and created the Individual Retirement Account, it did not restrict IRA investors to publicly traded securities. Subject to certain specific restrictions and the prohibited transaction rules, retirement accounts have historically been able to invest in a remarkably broad universe of assets, including real estate, private businesses, private investment funds, private loans, certain precious metals, and many other alternative investments.
Yet somehow, over the last 50 years, the IRA became almost synonymous with a brokerage account, and the 401(k) became synonymous with a menu of mutual funds. How did that happen? I think at least part of the answer can be understood through a concept economists and political scientists call regulatory capture, and understanding it may help explain not only how America's retirement system developed, but also why wealthy investors and institutions have historically enjoyed access to a much broader investment universe than the average American retirement investor.
What Is Regulatory Capture?
Regulatory capture is the idea that government regulation, even when originally created for legitimate public purposes, can gradually become influenced by the industries and institutions being regulated. The basic concept isn't complicated. Imagine the government decides an industry needs regulation because consumers need protection. The government begins writing rules, establishing compliance standards, creating licensing requirements, and determining how businesses in that industry can operate.
Who understands that industry better than almost anyone? The companies already operating inside it. Those companies naturally become deeply involved in the regulatory process. They hire lawyers, lobbyists, economists, compliance professionals, and government relations specialists. They submit comments on proposed regulations, meet with regulators, and participate in industry associations. Former government officials sometimes go to work in the industries they previously regulated, while people with industry experience sometimes move into government.
None of this necessarily involves corruption or illegal conduct. In many cases, regulators genuinely need industry expertise because modern financial markets, technology, banking, healthcare, energy, and other industries are extraordinarily complicated. The problem is that the interests of the largest companies and the interests of consumers aren't always identical. A giant corporation may actually prefer certain regulations because it already has the lawyers, technology, capital, and compliance infrastructure necessary to satisfy them. A startup or smaller competitor may not.
That means regulation can sometimes accomplish two things simultaneously. It can protect consumers from legitimate risks while also creating a competitive moat around the largest existing businesses, which is where regulatory capture becomes so important. The regulation doesn't necessarily have to say small companies can't compete. It simply has to make competing expensive enough, complicated enough, or risky enough that fewer companies are willing or able to do it.
Are We Watching the Same Debate Develop Around Artificial Intelligence?
Artificial intelligence provides a fascinating modern example of why this issue matters. OpenAI, Anthropic, Google, Meta, Microsoft, and other major technology companies are spending enormous amounts of money developing increasingly powerful AI systems, and at the same time, governments around the world are trying to determine how these systems should be regulated.
There are legitimate reasons for regulation. Powerful AI systems raise serious questions involving cybersecurity, privacy, biological risks, intellectual property, misinformation, national security, and potentially autonomous decision-making, and I'm not suggesting those concerns should be ignored. But regulatory capture teaches us to ask another question: who benefits from the regulatory structure that ultimately gets created?
Suppose operating a sufficiently powerful AI model eventually requires extensive government testing, expensive cybersecurity controls, licensing, mandatory reporting, enormous insurance coverage, sophisticated compliance departments, or government approval before a model can be released. OpenAI or Anthropic may be able to spend hundreds of millions of dollars satisfying those requirements. A small developer working on an open model cannot. The regulation may therefore accomplish something very interesting: it may legitimately make AI safer while simultaneously making it considerably harder for smaller competitors and open-source developers to challenge the largest AI companies.
That doesn't automatically make the regulation bad, nor does it prove that any particular AI company is trying to eliminate open models. The major AI companies themselves have taken different positions on open-weight models and regulation. But it illustrates the fundamental regulatory-capture question. When the biggest companies in an industry help government determine the rules governing that industry, are those rules protecting the public, protecting the incumbents, or doing some combination of both? We should ask that question about AI today, and I think we should also ask it about what happened to America's retirement system over the last 50 years.
Book a free call with a self-directed retirement specialist
- Review your self-directed retirement options
- Learn about investing in alternative assets
- Get all of your questions answered
ERISA Did Not Wall Off Alternative Assets
The Employee Retirement Income Security Act of 1974 was one of the most important retirement laws in American history. Among many other reforms, ERISA created the IRA. Congress later added Section 401(k) to the Internal Revenue Code in 1978, and the 401(k) subsequently evolved into the dominant employer-sponsored retirement vehicle for millions of American workers.
The important point, however, is what Congress didn't do. Congress did not say that an IRA could invest only in publicly traded securities. The Internal Revenue Code instead generally approaches IRA investing by identifying certain things an IRA cannot do. There are restrictions involving life insurance and certain collectibles, for example, and Internal Revenue Code Section 4975 contains extremely important prohibited transaction rules governing transactions between retirement accounts and certain disqualified persons. But the tax code does not contain a simple approved list saying that an IRA may own Apple stock, an S&P 500 mutual fund, and Treasury bonds but cannot own an apartment building, private company, or private investment fund.
That is why Self-Directed IRAs exist. The underlying IRA is not fundamentally different, what is different is the financial institution administering it and the assets that institution is willing to custody. That distinction has been lost on generations of retirement investors.
Wall Street Built the Wall
As America's retirement system expanded, large banks, brokerage firms, mutual fund companies, insurance companies, recordkeepers, and financial advisers became the primary infrastructure through which Americans accumulated retirement wealth. Those institutions understandably built systems around investments that were scalable, standardized, liquid, easily priced, easily traded, and easy to administer, and public securities fit that model perfectly. A share of Microsoft can be priced every second of the trading day. A mutual fund has standardized reporting. An ETF can be purchased electronically. A bond can be held through conventional custody systems.
Now compare that with a duplex in Miami. Someone needs to verify ownership. Someone needs to process the purchase. Expenses must be paid correctly. Rental income must flow back to the retirement account. The property may need an independent valuation. There may be prohibited transaction concerns, and if debt is involved, additional tax considerations may arise.
Or consider a $100,000 investment into a private startup. The custodian may need subscription documents, capitalization information, valuation information, and specialized reporting. There is no daily market price and no button that allows the asset to be liquidated at 10:32 tomorrow morning. From the perspective of a giant brokerage firm trying to administer millions of retirement accounts, it's easy to understand why publicly traded securities became preferable. But what makes perfect business sense for a financial institution doesn't necessarily produce the broadest investment choices for the retirement investor.
Over time, the institutional limitation started to look like a legal one. Americans began believing an IRA was a brokerage account because practically every IRA they encountered was offered by a brokerage firm. But an IRA is not a brokerage account, it's a tax-advantaged retirement structure, and a brokerage account is simply one possible platform for holding the IRA's investments. That difference is enormous.
Wall Street Didn't Need to Ban Alternative Assets
This is where the regulatory-capture concept becomes more subtle and, in my opinion, more interesting. Wall Street didn't need Congress to pass a law saying Americans couldn't own real estate or private investments in their IRAs, the tax code already allowed a broad investment universe. Instead, the retirement ecosystem gradually evolved around the needs of the largest financial institutions. Custody rules, fiduciary concerns, valuation requirements, securities regulation, recordkeeping requirements, compliance costs, employer liability concerns, and increasingly standardized technology all reinforced a retirement system built around publicly traded financial products.
Every individual rule could have a perfectly legitimate justification, and that's an important point. Regulatory capture doesn't necessarily mean every regulation is bad or that regulators are secretly working for financial institutions. It means the cumulative effect of regulation can favor the institutions best positioned to operate within that regulatory environment. The larger and more complicated the system becomes, the more valuable scale becomes, and Wall Street has scale.
The Accredited Investor Rule Created Another Wall
The accredited investor rules provide another powerful example of how investor protection can also restrict investor opportunity. The accredited investor concept dates to 1979 and 1980, but the modern rule most people think of was established in 1982.
For decades, one of the principal ways for an individual to qualify as an accredited investor has been financial: generally more than $200,000 of annual individual income, $300,000 of joint income, or more than $1 million of net worth excluding a primary residence. The rules have subsequently expanded to recognize certain professional credentials and other categories.
The rationale behind the rule is understandable. Private securities generally don't provide investors with the same disclosure regime that applies to publicly registered securities, so the government wants to protect people who may not have sufficient sophistication or financial capacity to understand or withstand the risks.
But think about the practical consequence. Wealth itself became one of the principal tickets into private markets. If you were wealthy enough, you could potentially invest in startups, venture capital, private equity, private credit, private real estate offerings, and other private securities. If you weren't wealthy enough, many of those opportunities were legally unavailable to you, which creates a cycle that favors the wealthy: people who already have substantial wealth get access to a larger universe of investments capable of producing additional wealth, while everyone else is generally directed toward public markets.
The timing also matters, because so much wealth gets created before a company goes public. Founders, employees, venture capital firms, private equity firms, and accredited investors can participate in years of growth before the average investor gets access. There is nothing wrong with public stocks, they've created enormous wealth for Americans. But wealthy and institutional investors often get to invest earlier. In simple terms, the wealthy often get a head start.
The 401(k) Reinforced the System
The evolution of the 401(k) pushed the retirement system even further in this direction. Employers understandably wanted simple plans, employees needed understandable choices, recordkeepers needed scalable technology, and plan fiduciaries wanted to reduce risk and fulfill their obligations under ERISA. The easiest solution became a standardized investment menu consisting primarily of mutual funds and, eventually, target-date funds. Again, there are perfectly reasonable reasons for this, but this is the result: a worker may accumulate $500,000, $1 million, or even several million dollars inside a 401(k), yet still be limited to 20 or 30 investment options selected by the plan. The worker owns the retirement wealth economically, but somebody else largely determines the investment universe. That's become so normal that almost nobody questions it.
Compare That with How the Wealthy Invest
The difference becomes clear when you look at how wealthy families and large institutions invest. They don't just own stocks and bonds, they also invest in real estate, private equity, private credit, venture capital, private businesses, and other assets.
The average retirement investor has historically had far fewer choices. You may own 15 different mutual funds, but if they mostly hold the same types of public stocks and bonds, are you really that diversified?
What Did Retirement Investors Potentially Lose?
I'm not anti-stock market. For someone who is just beginning to save for retirement, I think low-cost index funds can be one of the best places to start, because they're inexpensive, liquid, diversified, and simple. My objection isn't to public markets, it's to the idea that retirement investing should only mean public markets.
By creating a system overwhelmingly centered around publicly traded securities, retirement investors potentially lost access to several important benefits. One is greater diversification: real estate, private credit, private businesses, precious metals, and other alternative investments can have very different economic characteristics from publicly traded equities and bonds. Another is the potential illiquidity premium, since investors are sometimes compensated for committing capital to assets that can't be sold instantly, although that potential premium certainly comes with additional risk.
Most importantly, investors potentially lost access to some of the wealth creation occurring in private markets. If more companies remain private longer, and more value is created before an IPO or acquisition, restricting ordinary investors primarily to public securities becomes increasingly consequential.
Regulation Often Protects Us, Until It Protects the System
This is why regulatory capture is such an important concept. Most financial regulations start with good intentions, such as protecting retirement savers, preventing fraud, improving disclosure, reducing conflicts of interest, and protecting less experienced investors, and those are all worthwhile goals. But we also need to look at the system those regulations have created over time. If wealthy Americans and large institutions have access to the widest range of investments while ordinary Americans are largely limited to financial products offered by big financial institutions, we should ask whether the system is still working as intended.
There is a big difference between protecting people from fraud and protecting them from opportunity, and sometimes regulation can unintentionally cross that line.
The Self-Directed IRA Exposes the Entire Paradox
I've spent much of my career working with Self-Directed retirement accounts, and one of the things that continues to amaze me is how many sophisticated investors don't know these accounts exist. The Self-Directed IRA exposes the central contradiction in America's retirement system.
Take two people who each have $500,000 in an IRA. The first person's IRA is held at a traditional brokerage firm, and that person may believe the IRA can invest only in stocks, bonds, ETFs, and mutual funds because those are the only investments displayed on the platform. The second person's IRA is held with a Self-Directed IRA custodian and potentially invests in public securities, real estate, a private fund, private stock, precious metals, or other permitted assets.
Both investors are operating under the same Internal Revenue Code and receiving the same basic IRA tax benefits, yet they have access to completely different investment options. The difference isn't the law, it's the financial institution serving as the gatekeeper.
Congress Gave Us an IRA. Wall Street Turned It Into a Brokerage Account.
I think that heading summarizes 50 years of retirement investing remarkably well. Congress created a tax-advantaged vehicle that offered Americans considerable investment flexibility. The financial industry built an incredibly successful infrastructure around it, but that infrastructure overwhelmingly favored the financial products that large institutions could efficiently custody, administer, distribute, and monetize. Then securities regulation created additional barriers around private markets.
The result wasn't necessarily planned by some group sitting around a conference table, that's generally not how regulatory capture works. Instead, it tends to happen gradually: a reasonable regulation gets introduced, followed by new compliance requirements, financial institutions adapt, industry standards develop, and technology and business models get built around those standards. Eventually, consumers become so accustomed to the system that everyone assumes this is simply the way it has to work, which is exactly why regulatory capture can be so difficult to recognize.
The Next Retirement Revolution Should Be About Access
I believe the next major evolution in retirement investing should be about giving Americans greater access and control. That doesn't mean eliminating investor protections, and it doesn't mean putting someone's entire retirement account into a startup, cryptocurrency, or apartment building. It certainly doesn't mean alternative assets are appropriate for every investor. What it does mean is recognizing that a retirement account should be a vehicle for building wealth, not simply a distribution channel for traditional financial products. There's no reason technology can't increasingly allow an investor to hold stocks, ETFs, private businesses, real estate, private investment funds, precious metals, and digital assets within the same retirement ecosystem, subject to the appropriate tax, securities, and prohibited transaction rules.
Wealthy investors have understood the value of owning different types of assets for generations, and ordinary retirement investors deserve the same opportunity. Yet after more than 50 years of IRAs, one of the biggest misconceptions remains: the government never said your IRA had to be a brokerage account.
Regulatory capture helped change the way Americans think about retirement investing. Over time, rules, financial institutions, and industry practices created a system that pushed most retirement savers toward stocks, bonds, and mutual funds, even though the tax code generally allowed much more. The result is that an entire generation came to believe retirement investing meant investing through Wall Street. It doesn't have to. Americans should have the opportunity to diversify, invest in alternative assets, and take greater control of their retirement money.
Maybe the next retirement revolution isn't about creating another retirement account. Maybe it's about finally giving Americans greater access to the one they already have.
This content is for educational purposes only and does not constitute legal, tax, or investment advice. Consult a qualified professional before making any investment decisions.
