The Pros & Cons of Private Placements and How They Can Jumpstart Your Retirement Savings

Tim: In this video, we’re going to talk
about private placement IRAs – what are they, how do they work, and what are some
of the pros and cons. Good morning, Brian. How are you? Brian: Very good. How are you, Tim? Tim: I’m well, thank you. So, I want to talk about private placement
IRAs. Can you just define the term? What does it kind of mean? Brian: Sure. A private placement IRA, essentially, just
means when you’re using your IRA to invest in a private placement, which loosely just
means a private investment group which has been formed. Tim: Okay. Can you do that with a typical IRA? Brian: Well, with a typical IRA, you’re
probably going to be limited because most of the typical IRAs are going to restrict
you to investing in stocks, bonds and mutual funds. Tim: The normal stuff. Brian: Correct. But, you can certainly do that with a self-directed
IRA, which enables you to invest in anything that the IRS permits you to invest in, including
private placements. Tim: Okay, good. So, with these private placements, I’m just
trying to get an example. Can you give me two or three examples of the
kinds of things we’re talking about? Brian: Sure. It could be a hedge fund, it could be investing
in a private equity fund, it could be a real estate type of fund. Tim: Okay, so a real estate fund, you might
be gathering money to then invest in real estate? Brian: Sure. I may know someone who has put together a
private placement for the express purpose of purchasing real estate, bringing in investors,
and I can participate in that type of a fund, in that type of an investment, using my IRA. Tim: This makes total sense to me. So, I do have to set up a special kind of
IRA to do this, which is a self-directed IRA? Brian: That’s correct. Tim: How do you go about doing that? Brian: Well, the way we provide a self-directed
IRA is we create the plan for you, and within the plan there is an LLC, and the main feature
of that LLC is that you’re under the Operating Agreement of that LLC. You’re restricted to only invest in those
assets that the IRS permits you to. You’ll then set up a checking account at
a local bank for that LLC, and with that, you’ll invest in the private placement. Tim: It actually sounds reasonably sensible. So, what I’m sort of doing is setting up
an investment company, which is then attached to a specific bank account, and as long as
I kind of behave the right way that the IRS wants me to, it’s legit to then go and do
a private placement? Brian: That’s correct. Tim: All right, this makes sense. And, it also makes sense if I want to kind
of take control of my money a little bit more than the standard practice. Tell me, what are some of the pros and cons
of a private placement IRA. Brian: Well, I mean, every private placement
is obviously different. You have to do your own due diligence for
the specific private placement. But, one of the benefits is that, number one,
you can attain a much greater level of diversification by going just beyond, again, your typical
stocks, bonds and mutual funds. Another thing is that when it comes to bonds
today, with insurance rates as low as they are, people really need to at least look at
some of the alternatives to see if there are other ways that they can get some income away
from just buying your very, very traditional types of bonds. Tim: So, cons, I’m hearing, you know, with
the appropriate due diligence, you can be more diverse, which is a good investment strategy,
and potentially make more money then, especially, in a slower economy as the market is now? Brian: That’s correct. Tim: Thank you so much for explaining all
of that. Brian: You’re very welcome. Tim: It makes a lot of sense to me. For those of you who’d like to find out
more or maybe set up your own self-directed IRA with a view to private placements, please
reach us online at, or call our customer care team who are there
to answer all your questions and help set you up with your very own self-directed IRA.

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