Do I need to be an accredited investor to hold private equity in my IRA?

The SDIRA structure itself does not require accredited investor status. However, most private equity funds and many other alternative investments require it. Accredited investor eligibility is based on your personal income or net worth — not the size of the IRA.

Can a Roth IRA hold private equity?

Yes. A Roth self-directed IRA can hold private equity investments. For long-hold, high-growth assets, the Roth structure is particularly advantageous because all gains compound and are ultimately distributed tax-free. The same prohibited transaction rules apply regardless of whether the account is traditional or Roth.

What is UBTI and does it affect my IRA?

Unrelated Business Taxable Income (UBTI) is income generated by a tax-exempt entity — including an IRA — from an active business or from debt-financed investments. If an IRA generates more than $1,000 in UBTI in a given year, the IRA is required to file Form 990-T and pay tax on the excess at trust rates. Not all private equity investments generate UBTI — it is most commonly triggered by leveraged buyout structures or investments in operating businesses organized as pass-through entities. Reviewing the fund's structure with a CPA before investing is advisable.

Can I invest in a company I own through my IRA?

No. Investing IRA funds in a company you own or control, or in which a disqualified person (spouse, children, parents, fiduciaries) has a significant interest, is a prohibited transaction. Doing so can result in the entire IRA being treated as a taxable distribution in the year of the transaction. The prohibited transaction rules are strict and apply broadly — consult a tax advisor before any investment that involves entities connected to you.

How do distributions from a private equity fund work inside an IRA?

When a private equity fund distributes capital or returns — from a portfolio company sale, dividend, or other event — those proceeds flow back into your SDIRA. The funds remain inside the account, tax-deferred or tax-free (if Roth), until you take a distribution from the IRA itself under normal IRA rules.

How do I get started investing in private equity through an IRA?

The first step is ensuring you have a funded self-directed IRA at a custodian that permits alternative investments. If you have an existing IRA or a former employer 401(k), those can typically be transferred or rolled over into an SDIRA. From there, the quality of what you invest in matters as much as the account structure itself. Working with an advisor who pre-vets private market opportunities — evaluating managers, fund terms, track records, and retirement account suitability before presenting them to clients — is one of the most important decisions you can make in this space.

Back to Guides

Private EquitySDIRAAlternative Investments

Private Equity in Your IRA: What You Need to Know

Private equity in retirement accounts is no longer a fringe idea. Regulatory changes and executive conversations around expanding private market access have accelerated that shift, and more investors are asking the right question: not whether private equity belongs in a retirement account, but how to actually do it.

For most investors who want real control over where their retirement capital goes, a self-directed IRA is the most direct path. The obstacle isn't awareness — it's understanding how the mechanics work and finding the right guidance to move forward. This guide covers both.

What Is Private Equity?

Private equity refers to ownership stakes in companies that are not publicly traded on a stock exchange. It encompasses a broad range of investment strategies, including:

Growth equity — minority stakes in established private companies seeking capital to scale
Buyout funds — acquisition of controlling interests in mature businesses, often with operational restructuring
Venture capital — early-stage investment in startups and emerging companies
Co-investments — direct investment alongside a private equity fund in a specific deal
Secondary funds — purchase of existing LP interests in private equity funds from other investors

Historically, private equity has been the domain of large institutional investors — pension funds, endowments, sovereign wealth funds — and ultra-high-net-worth families. Access for individual investors has expanded significantly over the past decade, particularly through self-directed retirement accounts.

How Does Holding Private Equity in an IRA Work?

Some 401(k) plans are beginning to offer limited private equity exposure through pre-selected fund options — and that trend may continue. But for most individual investors who want to choose their own managers, access a broader range of funds, and maintain real control over their allocations, a self-directed IRA (SDIRA) is the most flexible vehicle available.

A self-directed IRA is held at a specialized custodian — a trust company or financial institution approved by the IRS to administer accounts holding alternative assets. The account functions identically to a regular IRA in terms of tax treatment, contribution rules, and withdrawal requirements. What changes is the investment universe.

When you invest through an SDIRA, the IRA itself is the investor of record — not you personally. The custodian holds the LP interest, shares, or membership units on behalf of the account. All distributions and returns flow into and out of the IRA. You direct the investments; the custodian executes them.

The account type — traditional or Roth — determines the tax treatment. The custodian determines what you can hold.

For a full overview of how self-directed IRAs work, see: What Is a Self-Directed IRA?

Not sure which custodian to use? Fees, accepted asset types, and service quality vary widely. I recommend specific ones based on what you're trying to do.

What Are the Tax Advantages?

The tax advantage of holding private equity inside an IRA comes from the compounding effect of sheltering gains that would otherwise be taxable events.

Traditional Self-Directed IRA

Gains, dividends, and interest compound tax-deferred. You pay no taxes on returns until you take distributions in retirement, at which point withdrawals are taxed as ordinary income. This allows capital to compound at a faster rate than in a taxable account, where gains would be reduced each year by taxes.

Roth Self-Directed IRA

Contributions are made with after-tax dollars, but all growth is tax-free — and qualified distributions in retirement are also tax-free. For long-hold, high-growth private market assets, the Roth structure can be especially powerful. A private equity investment that grows 3x over a decade in a Roth IRA generates no tax liability on the gain.

The decision between a traditional and Roth SDIRA depends on your current tax rate, expected future tax rate, and time horizon. A financial advisor can help you model the after-tax outcomes for your specific situation.

Who Can Invest?

The self-directed IRA structure itself does not require accredited investor status. However, most private equity funds and many other alternative investments accessed through an SDIRA do require investors to meet the SEC's accredited investor definition.

To qualify as an accredited investor, you generally must meet one of the following:

Net worth exceeding $1 million, excluding your primary residence
Individual income exceeding $200,000 in each of the two most recent years (or $300,000 combined with a spouse), with a reasonable expectation of the same in the current year
Certain professional certifications (Series 7, Series 65, or Series 82 licenses in good standing)

The accredited investor requirement applies to the investor — which, in the case of an SDIRA investment, is you as the account holder, not the IRA itself. The IRA is the vehicle; you are evaluated for eligibility.

What to Know Before You Invest

Illiquidity

Private equity investments are typically illiquid for the life of the fund — often five to ten years or longer. Distributions occur on the fund's schedule, not yours. This is a characteristic of the investment type, not a flaw, but it requires that the capital committed be genuinely long-term.

Unrelated Business Taxable Income (UBTI)

Certain private equity investments — particularly those involving operating businesses with debt financing — can generate Unrelated Business Taxable Income inside an IRA. UBTI is taxable even within a tax-advantaged account, at trust rates. Not all private equity investments trigger UBTI, but it is worth understanding before committing capital. A CPA familiar with alternative investments can evaluate the UBTI exposure of a specific opportunity.

Prohibited Transactions

The IRS prohibits self-dealing inside a self-directed IRA. You cannot use your SDIRA to invest in a company you own or control, a company owned or controlled by a family member, or any other transaction that benefits you personally before retirement. Violating these rules can result in the entire account being treated as a taxable distribution. Working with a knowledgeable advisor and a reputable custodian is essential.

Annual Valuation

Unlike publicly traded securities, private equity holdings do not have a daily market price. IRA custodians require an annual fair market valuation of illiquid assets for IRS reporting purposes. This is typically provided by the fund manager or a qualified independent appraiser.

The Role of a Trusted Advisor

The self-directed IRA structure gives you control — but control is only valuable when paired with quality deal flow and rigorous vetting.

In public markets, information is abundant and prices are largely transparent. In private markets, the opposite is true. Deal quality varies enormously, and the information available to evaluate any given opportunity is limited to what the manager chooses to share. The difference between a well-structured fund with experienced management and a poorly structured one isn't always obvious on the surface.

This is where working with an advisor who specializes in private markets — and who applies genuine due diligence before presenting opportunities to clients — matters significantly. A good advisor doesn't just help you set up the account and point you toward deals. They bring a curated set of opportunities that have already been evaluated for manager quality, track record, fee structure, legal terms, and suitability for a retirement account context.

The custodian holds your assets and executes transactions. The advisor sources and vets the investments. Both matter — but the quality of what goes into the account ultimately drives the outcome.

Frequently Asked Questions

This guide is for informational purposes only and does not constitute investment, tax, or legal advice. Private equity investments involve significant risk, including the potential loss of principal, and are illiquid. They are suitable only for investors who can bear the loss of their entire investment. Consult a qualified financial advisor, CPA, and attorney before investing.