Learn with Alto IRA: SDIRA

MODUlE 3

Accessing Private Markets with a Self-Directed IRA

MODULE 3

Introduction

Welcome! This self-paced module explores how investors can use retirement dollars to access private markets through a self-directed IRA (SDIRA).

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We’ll cover:

Why traditional retirement investing is often limited
What makes an IRA “self-directed”
How private investments can fit into retirement planning
Tax-advantaged growth considerations
IRS rules and compliance basics
Common misconceptions about SDIRAs

1 OF 7: THE CURRENT STATE OF RETIREMENT INVESTING

The current state of retirement investing

1 OF 7: THE CURRENT STATE OF RETIREMENT INVESTING

Why retirement investing is often limited

Most retirement assets today are held in employer-sponsored plans like 401(k)s or standard IRAs at brokerage firms. These accounts typically limit investors to public market securities like:

Public stocks

Bonds

Mutual funds

ETFs

As a result, the majority of retirement savings remain concentrated in public markets.

1 OF 7: THE CURRENT STATE OF RETIREMENT INVESTING

Structural limitations in standard retirement accounts

Employer plans and many IRAs restrict investment choices to pre-approved menus of traditional assets. While regulatory efforts are underway to expand options, many accounts remain limited.

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This means:

No direct investment in private companies
No participation in most private funds
Limited access to alternatives

The account type, rather than investor preference, often determines what's available.

1 OF 7: THE CURRENT STATE OF RETIREMENT INVESTING

The gap in access

Meanwhile, private markets have expanded significantly. More companies are staying private longer, which means:

More growth may occur before an IPO, if one happens at all
Private capital is playing an increasing role in funding innovation
Public market investors may be missing a significant piece of value creation

This points to a growing gap between where retirement assets are concentrated and where opportunities are expanding.

1 OF 7: THE CURRENT STATE OF RETIREMENT INVESTING

QUIZ: True or false?

Most retirement accounts allow direct investment in alternatives like private equity and private credit.

True

False

Answer

False. Most standard retirement accounts restrict investments to publicly traded securities and packaged funds.

2 OF 7: WHAT IS A SELF-DIRECTED IRA

What is a self-directed IRA?

2 OF 7: WHAT IS A SELF-DIRECTED IRA

What makes an IRA “self-directed”?

A self-directed IRA (SDIRA) is a type of IRA that allows investors to choose from a broader range of investments beyond traditional public securities.

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The tax treatment is the same as other IRAs. The difference is investment flexibility. The account holder directs investment selection rather than being limited to the pre-approved menu associated with standard retirement accounts.

2 OF 7: WHAT IS A SELF-DIRECTED IRA

Expanding investment choice

With an SDIRA, investors can allocate retirement dollars to a range of private market investments, including private equity, real estate, private credit and more.

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This added flexibility comes with important considerations around risks and regulations, which we'll cover later in the module.

2 OF 7: WHAT IS A SELF-DIRECTED IRA

The role of a qualified custodian

All IRAs, including SDIRAs, must be held by a qualified custodian. The custodian:

Administers the account
Holds assets on behalf of the investor
Handles required IRS reporting

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Custodians do not provide investment advice. Because these investments are self-directed, choosing a custodian with the expertise and infrastructure to support your investment interests can help ensure a more streamlined experience.

2 OF 7: WHAT IS A SELF-DIRECTED IRA

Eligible investments in an SDIRA

SDIRAs can hold a wide range of IRS-permitted alternative assets, including:

Private Equity

Venture Capital

Private Credit

Real Assets

Each comes with different risk, liquidity and return characteristics.

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Certain assets, like collectibles and life insurance, are prohibited by the IRS as SDIRA investments.

2 OF 7: WHAT IS A SELF-DIRECTED IRA

Eligibility and structure considerations

Investors should evaluate:

Accreditation requirements

Minimum investment thresholds

Liquidity profile

Capital call structures

3 OF 7: WHY USE AN SDIRA FOR PRIVATE MARKETS

Why use retirement dollars for private markets?

3 OF 7: WHY USE AN SDIRA FOR PRIVATE MARKETS

Long-term time horizon alignment

Private investments often have multi-year lifecycles of 5–10+ years. Retirement accounts are also long-term vehicles by design. This natural alignment can make retirement capital well suited for illiquid private market investments.

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As covered in Module 2, aligning investment timelines with long-term goals like retirement is known as duration matching. An SDIRA can help investors put this concept into practice.

3 OF 7: WHY USE AN SDIRA FOR PRIVATE MARKETS

Tax-advantaged growth

Depending on the account type:

Traditional SDIRAs may offer tax-deferred growth
Roth SDIRAs may offer tax-free qualified withdrawals

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This means potential gains from private investments may compound within a tax-advantaged structure. Tax outcomes depend on individual circumstances and compliance with IRS rules.

3 OF 7: WHY USE AN SDIRA FOR PRIVATE MARKETS

QUIZ: Multiple Choice

Why might retirement accounts align well with private investments?

They provide daily liquidity

They are short-term savings vehicles

They are designed for long-term growth

They eliminate investment risk

Answer

They are designed for long-term growth.

3 OF 7: WHY USE AN SDIRA FOR PRIVATE MARKETS

The SDIRA structure

Three distinct roles typically exist within a self-directed IRA:

Investor: Makes investment decisions
Custodian: Administers the account and handles reporting
Issuer or platform: Sponsors or offers the private investment opportunities

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Understanding these roles helps investors make effective use of their SDIRA.

3 OF 7: WHY USE AN SDIRA FOR PRIVATE MARKETS

How the investment process works

The typical process works as follows: the investor selects a private market opportunity, either one they sourced or one brought to them by an issuer. The investor and issuer complete investment documents. The custodian processes the transaction, and funds move from the IRA to the issuer. The asset then settles and is held within the IRA.

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In short: the investor directs, the custodian executes.

4 OF 7: SDIRA TYPES AND FUNDING

SDIRA types and funding

4 OF 7: SDIRA TYPES AND FUNDING

Traditional, Roth and SEP SDIRAs

There are several types of self-directed IRAs, each with different tax treatment and contribution structures. Here are three of the most common:

Traditional

Contributions may be tax-deductible (subject to limits). Growth is tax-deferred. Distributions are taxed as ordinary income.

Roth

Contributions are made with after-tax dollars. Qualified withdrawals may be tax-free. No required minimum distributions during the owner's lifetime.

SEP

Designed for self-employed individuals or small business owners. Employer-funded contributions. Higher contribution limits than traditional IRAs.

The right IRA type for you will depend on factors like your income, tax situation and long-term planning strategy.

4 OF 7: SDIRA TYPES AND FUNDING

QUIZ: True or False

With a Traditional IRA, qualified withdrawals are tax-free.

True

False

Answer

False. With a Traditional IRA, growth is tax-deferred and withdrawals are taxed. With a Roth IRA, qualified withdrawals are tax-free.

4 OF 7: SDIRA TYPES AND FUNDING

Rollovers

Investors can fund an SDIRA by rolling over assets from 401(k)s, 403(b)s or other employer-sponsored plans. Rollovers allow retirement dollars to move without triggering taxes when done properly.

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After leaving a job, an account holder can typically request a direct transfer from their employer-sponsored plan to their SDIRA. With a direct transfer, the money moves from one custodian to the other without being touched by the account holder, avoiding potential taxes or penalties. Processing time depends on the plan administrator's approval process.

4 OF 7: SDIRA TYPES AND FUNDING

Transfers

IRA-to-IRA transfers move funds between custodians. Transfers are generally non-taxable and may be simpler than rollovers.

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The account holder can typically request a direct transfer from within their existing IRA, and transfers often settle within a few business days.

4 OF 7: SDIRA TYPES AND FUNDING

Contributions

Annual contributions are subject to IRS limits. Timing, eligibility and income thresholds vary by IRA type. Investors should confirm current IRS rules before contributing. Cash contributions can be initiated within the SDIRA and typically settle within a few business days.

5 OF 7: MANAGING YOUR SDIRA

Managing your SDIRA

5 OF 7: MANAGING YOUR SDIRA

Valuations and reporting

Private investments do not have daily pricing.

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Valuations are typically:

Quarterly or annual
Based on issuer reporting
Reflected in IRA statements

The custodian reports required tax forms annually.

5 OF 7: MANAGING YOUR SDIRA

Distributions and liquidity events

Liquidity events may include:

Company sale
Fund exit
Debt repayment

Proceeds flow back into the IRA, not directly to the individual, unless a distribution is taken.

A distribution refers to when the account holder withdraws funds from the IRA. If the withdrawal doesn't meet IRS requirements for qualified distributions (certain age or holding period thresholds), it may incur taxes or penalties.

5 OF 7: MANAGING YOUR SDIRA

Investor responsibility

In an SDIRA:

The investor performs due diligence
The investor selects investments
The investor assumes investment risk

Custodians typically do not evaluate the merits of an opportunity, though some that also serve as investment platforms may have a high-level vetting process in place.

5 OF 7: MANAGING YOUR SDIRA

Portfolio construction considerations

When building their SDIRA portfolio, investors may evaluate:

Allocation size
Liquidity needs
Risk tolerance
Diversification impact

Private exposure should be considered within the broader retirement strategy.

6 OF 7: RULES AND COMPLIANCE

Rules and compliance

6 OF 7: RULES AND COMPLIANCE

IRS rules governing SDIRAs

SDIRAs follow the same IRS framework as other IRAs. Key areas include:

Contribution limits
Distribution rules
Required minimum distributions (RMDs) (when applicable)
Prohibited transactions

6 OF 7: RULES AND COMPLIANCE

Prohibited transactions and disqualified persons

Certain transactions are not allowed within an SDIRA, including:

Self-dealing
Personal use of IRA-owned assets
Transactions with disqualified persons

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Compliance matters. Violations can result in penalties or disqualification of the IRA.

6 OF 7: RULES AND COMPLIANCE

QUIZ: True or False

An SDIRA custodian evaluates whether an investment is financially sound before allowing it.

True

False

Answer

False. The custodian administers the account but does not assess investment quality.

7 OF 7: PUTTING IT ALL TOGETHER

Putting it all together

7 OF 7: PUTTING IT ALL TOGETHER

Aligning long-term strategy

Private markets and retirement accounts both emphasize:

Long-term growth

Strategic allocation

Capital commitment discipline

When thoughtfully structured, an SDIRA can expand diversification while maintaining the tax advantages of a retirement vehicle.

7 OF 7: PUTTING IT ALL TOGETHER

Preparing for the lifecycle

Investors should understand:

Capital commitment timelines

Expected holding periods

Exit structures

Tax treatment at distribution

Private investing is a multi-year journey, particularly inside retirement accounts.

7 OF 7: PUTTING IT ALL TOGETHER

Alto’s role

Alto acts as a self-directed IRA custodian and private investment marketplace. We:

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Facilitate account setup and funding
Feature curated private opportunities (or allow investors to bring in a deal they source themselves)
Process investments
Handle administrative and tax reporting functions

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Investment decisions remain with the investor.

7 OF 7: PUTTING IT ALL TOGETHER

Common myths about SDIRAs

Myth:

SDIRAs are fundamentally different from other IRAs.

Myth:

SDIRAs are only for ultra-wealthy investors.

Myth:

SDIRAs are too complicated to manage.

Myth:

Private investments are inherently riskier than public investments.

Myth:

There’s no transparency in private markets.

MODULE 3: COMPLETE

Nice work, you've completed Module 3!

Here's what you covered:  

Why traditional retirement accounts are often limited to public markets
What self-directed IRAs are and how they expand investment choice
Why retirement capital can align well with private markets
How SDIRAs are structured, funded and managed
Key IRS rules and compliance considerations
Common myths about SDIRAs

A self-directed IRA can broaden investment choice, maintain tax advantages and align long-term capital with long-term opportunities. Education, compliance and thoughtful portfolio construction are essential. Stay tuned for more learning modules coming soon!

Accessing Private Markets with a Self-Directed IRA

Introduction

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The current state of retirement investing

Why retirement investing is often limited

Structural limitations in standard retirement accounts

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The gap in access

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Most retirement accounts allow direct investment in alternatives like private equity and private credit.

What is a self-directed IRA?

What makes an IRA “self-directed”?

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