Age Matters
Self-directed IRAs (SDIRAs) offer investors access to a broader range of alternative assets—including real estate, commodities, cryptocurrencies, and private equity. Among these, private equity can be particularly enticing due to its potential for outsized returns. However, private equity is also illiquid, high-risk, and long-term in nature. That raises an important question: at what age should a person stop—or at least be cautious about—investing their SDIRA in private equity?
Understanding the Nature of Private Equity
Private equity investments typically:
- Require long holding periods (often 7–10 years or longer),
- Are illiquid (you can’t easily sell your stake before the fund closes),
- Involve high minimums and lock-up periods,
- May not produce consistent income,
- Can lose value or fail to return capital.
Because of these traits, age and investment horizon matter significantly when using retirement accounts like an SDIRA.
Key Age Milestones to Consider
Under 50: Green Light (Generally)
Investors in their 30s and 40s have time on their side. The long lock-up periods and potential for high returns can be an asset in a diversified SDIRA portfolio. Even if a private equity investment takes a decade to pay off, younger investors have time to recover from losses or liquidity delays.
50–59: Proceed With Caution
As you approach your 60s, liquidity and portfolio preservation become more important. Investing in private equity may still make sense, particularly if:
- You have other liquid investments in your SDIRA,
- You won’t need to tap retirement accounts for at least 10 years,
- You are willing to take on risk for potential upside.
But the allocation should be smaller and carefully considered.
60–69: Risk of Illiquidity Increases
This is a critical transition period. At 59½, you can begin withdrawing from your IRA without a penalty. At 72 (or 73 for some), Required Minimum Distributions (RMDs) begin, and your assets must be liquid enough to meet these obligations.
Private equity assets are typically not RMD-friendly, meaning:
- You may struggle to meet RMDs without selling other assets,
- Valuations may be difficult to determine for RMD calculations,
- You could be forced to make distributions in-kind, complicating your tax picture.
However, not all private equity funds are the same. For example, the Platinum Ridge Private Equity Fund offers an unusually flexible structure: investors can redeem their units with 30 days’ notice after a 1-year holding period. This level of liquidity is rare in private equity and can make such a fund more suitable for older investors—provided they understand the terms, risks, and redemption policies in detail.
70 and Beyond: Avoid New Private Equity Investments
For most investors past 70, initiating new private equity investments in an SDIRA is not recommended unless:
- You are extremely high net worth,
- The PE opportunity is short-term and income-producing,
- You have already met or exceeded your RMD obligations from other sources.
At this stage, the focus shifts heavily toward income, capital preservation, and estate planning. Illiquid, high-risk investments like private equity could impair your flexibility, cash flow, and compliance with RMDs.
Factors That Matter More Than Age Alone
While age is a strong consideration, a few individual factors can shift your personal answer:
- Liquidity Needs: Will you need to access the money in the next 5–10 years?
- Portfolio Balance: Is your portfolio diversified with liquid and income-producing assets?
- Risk Tolerance: Can you handle a complete loss or indefinite lock-up?
- Wealth Level: Do you have substantial assets outside your SDIRA?
- RMD Strategy: Do you have a plan to cover RMDs from other sources?
Conclusion: The Rule of Thumb
After age 60, and especially after 65, investors should carefully reconsider new private equity investments within a self-directed IRA. By 70, most people should avoid them altogether unless they have high risk tolerance, high liquidity elsewhere, and a clear strategy to meet RMDs.
That said, funds like the Platinum Ridge Private Equity Fund, which allow redemptions with 30 days’ notice after a 1-year holding period, may be an exception worth evaluating, especially for investors in their 50s and 60s seeking a mix of private equity exposure and liquidity flexibility.
Private equity isn’t bad—it just demands patience, planning, and a long runway. The older you are, the shorter that runway becomes. A well-structured retirement plan balances risk and reward with one eye firmly on the exit door. And private equity, for all its upside, often locks that door tight—unless you’re investing in a fund that leaves it cracked open.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Always consult a licensed financial advisor or tax professional before making investment decisions, especially regarding retirement accounts and private equity.
