Use your retirement money to invest in private companies


Tax-advantaged retirement accounts are one tool that individuals can use to build the wealth they need to live out their golden years in comfort. Typically, these accounts hold stocks, bonds, ETFs, or mutual funds that give investors time to let their portfolios build value over the long haul.

Some individuals may prefer to take control of their retirement savings and use self-directed strategies to diversify their portfolio and pursue differentiated returns. For these individuals, investing in companies before they are publicly traded may be an appropriate strategy to add to their retirement portfolio.

The Details

As a leading private securities marketplace, Forge Global specializes in helping individuals buy shares of private companies that are developing the technologies of the future. Through our custodial division, Forge Trust, investors can open a Self-Directed IRA which can then hold these shares in a tax-advantaged manner.

What is a Self-Directed IRA?

A Self-Directed IRA account (SDIRA) is a retirement account where individuals control their investment options and are free to allocate their dollars across a spectrum of alternative asset classes.

While traditional IRA accounts may only invest in stocks, bonds, mutual funds, ETFs, and other conventional liquid assets, SRIRAs may hold alternative assets, including private company shares, real estate, direct lending, private debt, etc.

SDIRAs are available to investors as

  • Traditional IRAs, where individuals make tax-deductible contributions, or
  • Roth IRAs, where individuals make post-tax contributions and collect tax-free distributions once they meet the holding period

Forge Global has facilitated over $12 billion in private company investments,1 and Forge Trust provides custody and safekeeping for more than $14 billion of alternative assets. 2 Investors seeking more diversified retirement returns can work with Forge Global to own shares of private companies, which can be held in a Forge Trust SDIRA account.

Why private companies?

Today’s private companies are on the cutting edge of new technologies like artificial intelligence (AI) and clean energy, as well as more established categories like enterprise software and financial technology. In addition, today’s technology companies tend to stay private for longer periods of time and accrue more value while private than those in the past.

Pre-IPO investing offers individuals the opportunity to invest in companies early, while that value is developing, rather than waiting until a company has grown to the point of going public. Imagine if you invested in a company like Apple or Microsoft before they ever went public.

That said, investing in a pre-IPO company can potentially carry more risk. For one, there is no guarantee the private company will go public or have a liquidity event. Furthermore, even if the company does go public, there is no guarantee that the investment will be profitable, as some stocks drop before or after going public.

Who can invest in private markets through Self-Directed retirement accounts?

Individuals must be accredited in order to invest in private companies. An accredited investor is someone who meets specific criteria, such as having a net worth of at least $1 million, or an income exceeding $200,000 for the past two years. There may be additional vetting considerations when investing in private companies, and Forge Global provides a Private Market Specialist to work with investors throughout the process.

How can I learn more about investing in private companies with Forge Trust?

Forge Global is a leader in private market investing, and Forge Trust provides custody for nearly 2 million retirement accounts. To learn more about opening a Self-Directed IRA to invest in private companies or other alternative assets, visit the Forge Trust Co. website or call 1-800-248-8447.

Pre-IPO investing and Self-Directed IRA FAQs

What is a Self-Directed IRA (SDIRA)?

An SDIRA is a type of retirement account that allows individuals to gain exposure to alternative investment asset classes like private equity, real estate, and private debt using pre or post-tax income.

Can I use a Self-Directed IRA to invest tax-advantaged dollars in private companies?

Yes. If you are an accredited investor, Forge Trust offers a Self-Directed IRA that can be used to invest in private companies, as well as many other types of alternative assets.

How does investing in private companies differ from traditional investment options for retirement accounts?

Investments in private companies are typically less liquid than assets commonly associated with retirement accounts like stocks, bonds, mutual funds, or ETFs. Investments in private companies may much longer to execute than conventional investments, and there is no guarantee of liquidity to sell these investments further down the road.

What are some of the risks when investing in pre-IPO companies?

Investing in a pre-IPO company can potentially carry more risk when compared to more traditional investments.

  • One of the primary risks of owning stock in a private company is the lack of liquidity This is especially important for (SD)IRA owners who are subject to Required Minimum Distributions. Consult your tax advisor before investing. There is no guarantee a private company will have an IPO or a liquidity event. Furthermore, even if the company does go public, there is no guarantee that the investment will be profitable, as some stocks drop before or after going public.
  • In general, there is less price transparency in private markets compared with public stock markets, and there tends to be less information available for private stocks, which makes it more difficult to perform due diligence.
Are there any tax implications or penalties associated with investing retirement funds in private companies?

Investments held in SDIRAs, including private company stock, are subject to the same IRS rules as traditional IRAs. Investors are advised to consult with a financial advisor and/or tax advisor prior to investing in alternative assets.

How do you establish a Self-Directed IRA?

Forge Trust offers an easy-to-navigate online sign-up process to establish an SDIRA. Investors can work with the team at Forge Trust to establish their account and fund it from existing retirement accounts or through new contributions.

1 From inception to December 31, 2022 (including the historical business and companies Forge has acquired on a pro forma basis). Source: Forge Form 10-K, filed March 1, 2023.

2 As of 7/31/23, based on the last known investment values of assets including, but not limited to, private companies, real estate, and note investments.

About the Author

Andrew Bloomenthal is an experienced financial journalist covering all areas of finance and investment. He previously held positions at Institutional Investor Magazine, Investopedia and CNN. Read more from Andrew.

Please Read These Important Legal Notices & Disclosures

Before making private investments, investors should seek their own legal, tax, and investment advice as Forge Global is solely a passive custodian for IRAs.

Forge Trust Co. does not give legal, tax, or investment advice, and is solely a passive custodian for IRAs. This blog post is intended to provide general education regarding SDIRAs and investing in private stock. Nothing in this post is an endorsement or recommendation of any investment, promoter, or investment product, including private stock. You should seek your own legal, tax, and/or investment advice if you wish to proceed with a self-directed IRA.

The information and material presented in this article is provided for your informational purposes only and does not constitute an offer by Forge Global, Inc., Forge Securities LLC or any of its affiliates (collectively, "Forge") to sell, or a solicitation of an offer to buy any securities and may not be used or relied upon in connection with any offer or sale of securities. An offer or solicitation can be made only through the delivery of final offering document(s) and purchase agreement and will be subject to the terms and conditions and risks delivered in such documents.

To the extent information about or defining specific terms is provided herein, Forge makes no representations as to its accuracy and has no duty to update such information. Such information is based on Forge’s experience and the meanings and connotations of terms as Forge typically uses and interprets them. Others may construe such terms differently, and you should do your own research and consult with financial, legal and tax professionals regarding any such concepts included herein.

This article does not constitute an offer to provide investment advice or service. Registered representatives of Forge Securities LLC do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services. Securities referenced in this article may be offered by Forge Securities LLC, member FINRA/SIPC.

Forge Securities LLC is a wholly owned subsidiary of Forge Global, Inc. Certain affiliates may act as principals in such transactions. Forge Data LLC is an affiliate of Forge Global, Inc. and Forge Securities LLC.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice. Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.