Invest in Alternatives using your IRA

Self Directed Retirement Accounts Give You the Freedom to Invest

A self directed IRA (Individual Retirement Account) is defined by the type of investments owned within the plan. It is not a special retirement account. Any IRA can self-direct for greater diversification and control in an investment portfolio.

With a self directed investing account, you choose the investments. If you think outside the box, a self directed IRA is your ideal vehicle to control your retirement. Unlike conventional institutions, SDIRA custodians or trust companies do not limit investment decisions. Custodians allow investments in alternative assets such as real estate and private placements.

With self-direction, the account owner directs all investments and does all due diligence. As a self directed IRA custodian, Midland does not sell products nor offer financial advice. Our goal is to inspire investors to understand their investment choices. We want investors to take control of their retirement accounts. When you self-direct, all income and gains in an IRA are tax-deferred until you take a distribution. With a Roth IRA, all income and gains to the account are tax-free.

You have two options to get started: 

  1. You can use your Traditional, SEP, or Roth IRA investment to invest with Tunnel. To start, you’ll want to have your IRA dollars in an account with our partner, Midland Trust. They are best-of-breed and earn high customer satisfaction scores for offering alternative IRA investment choices. See the steps below to begin.
  2. Or, if you have your own Self-Directed IRA, you can use that to direct funds to Tunnel Equity Partners and/or Tunnel Oil & Gas Funds yourself. To do this, you’ll want to reach out directly to our team at invest@tunnelequity.com to start the process. We are happy to walk through the steps with you.

Follow These Easy Steps to Get Started with Midland Trust

 

1. Open an account

Open a Midland account by completing our online application (typically takes around 10 minutes). See a video demo

2. Fund the account

Fund the account via:

  • Transfer from an existing IRA 
  • Rollover (from an inactive plan like a 401K), or 
  • Contribution (annual limit of $6,000, $7,000 for those 50 and older)

3. Make the investment

Complete the appropriate form for the asset in which you wish to invest

Create your account with Midland Trust
Investing in Private Equity With a Self Directed Retirement Plan
A self directed retirement plan can invest in most private offerings. These offerings include private equity/private stock. When investing in private equity with a retirement account, the dividends and gains from investments are paid directly to the retirement account. These dividends are either tax-deferred (Traditional IRAs) or tax-free (Roth IRAs). There can be capital calls with these types of investments, so please understand the investment and how it affects your IRA.

Investing in private equity within an IRA has been an option since 1974. However, the vast majority of investors are not aware of this option. This unawareness is due to traditional retirement account custodians limiting investments to Wall Street stocks, bonds, and mutual funds. Midland allows investors to choose alternative assets such as real estate and private equity investments to build their wealth.

Who Can Invest in Private Equity With a Self Directed IRA?
Typically, these alternative assets are limited to accredited and institutional investors. Accredited investors are those proven to be financially fit to invest large amounts of funds over a long time without sustaining a substantial hardship if the asset is fruitless. These funds may include investing in startup businesses, developing technology, gaining capital to improve an existing entity’s viability, and even acquiring an existing business.

Accredited investors can use their self directed IRAs and other retirement plans to invest in a private stock. This strategy allows investors to build tax-sheltered income in their accounts. Midland works closely with clients investing in private equity to facilitate the purchase in compliance with current rules and regulations. Our ability to do this maintains the account’s tax-advantaged status. It enables our clients the precious time to identify holdings they believe will increase their potential for building retirement wealth.

Why do I need to use Midland or another custodian?
Because IRAs have tax advantages, the IRS requires an intermediary between an IRA holder and their account to provide tax reporting and record keeping. Most banks and brokerage firms perform this role when you buy the products they sell or publicly traded investments. Because of valuation and administrative issues, these companies do not allow for private offerings. Midland specializes in the administration of such assets.
How are the IRA investments titled?
The IRA is a separate entity from that of the account holder. When an IRA invests, the investment is always titled to the IRA using the IRA’s tax ID.
What is Midland’s/Custodian’s role after funding the investment?
Midland will send and receive any funds between the IRA and the investment. We will request a Fair Market Value (FMV) update annually and update the account according to the FMV provided by the manager.
What should I watch out for?
In some instances, like investing in operating businesses and leveraged investments, taxes may apply. Unrelated Business Income Tax (UBIT) and Unrelated Debt-Financed Income (UDFI) should be considered with certain business structures. It is best to consult your professional advisors to determine if these taxes will affect your IRA investment.

For more information, please contact:

Adam Sypniewski
Director – Midland Trust Company
Phone: 312.767.6863
Email: adam@midlandtrust.com

 www.midlandtrust.com

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According to SEC regulations, an accredited investor is someone with a net worth exceeding $1 million (excluding the value of the person’s residence) or someone who has earned an income of $200,000 (or $300,000 for a married couple) in each of the prior two years, someone who holds a Series 7, 65 or 82 license.