Roughly $19.2 trillion sit in IRAs right now.

That's 39% of every retirement dollar in America, up from 24% two decades ago, spread across roughly 60 million households.

And I'd bet most of the people who own one have never read what it's actually allowed to do.

Today I want to go through the seven misconceptions I hear most often about IRAs that simply aren't true.

And the last one changes what you can even own in an IRA (hint: it’s more than just public equities!).

Let's dive in…

What you’re about to read in this issue is what an IRA is allowed to do.

Next Monday, I'm going live with one of the foremost experts on retirement accounts to go deep on what I believe to be the most interesting misconception on this list.

I'm co-hosting a free live fireside with Mat Sorensen of Directed IRA on how IRA dollars actually get into venture, startups, and private companies. We’ll cover the mechanics, the rules, and the parts many people can get wrong.

Monday, September 21st at 2pm ET

It’s free to register, and we’ll have a live Q&A for anyone who attends!

Save your seat →

There is no income limit on contributing to a traditional IRA.

The limits people are thinking about do two jobs:

So a high earner who gets no deduction and can't invest into a Roth directly can still make a nondeductible contribution to a traditional IRA of $7,500 in 2026, or $8,600 if you're 50 or older.

And that nondeductible contribution can operate as basis for the backdoor Roth, which is how high earners may get money into a Roth IRA every year despite the income limits.

These are two separate retirement accounts, with two separate contribution limits.

In 2026, that's up to $24,500 employee contribution into a 401k and another $7,500 into an IRA.

They are separate limits governed by separate IRS rules, and nothing about having one reduces contribution to the other.

What your workplace plan actually affects is whether the traditional IRA contribution is deductible.

Normally you need earned income in a year to fund an IRA, but the spousal IRA is a cool exception to that rule.

If one spouse has earned income, they can fund an IRA in the non-working spouse's name, at any age, up to the same annual limit.

For a single-income household, this quietly doubles how much you can get into IRAs every year!

It is also probably one of the least-used provisions in the tax code relative to how simple it is to execute.

This used to be true, but it stopped in 2020.

The old cut off for traditional IRA contributions was age 70½, but the SECURE Act repealed it.

So if you have earned income, you can contribute to a traditional IRA at any age.

I still hear this misconception constantly, even six years after it was repealed, which tells you something about how much these accounts can be misunderstood.

Traditional IRA and Roth IRA contributions are open until the tax filing deadline!

This is often April 15th, which means you can still fund the prior year’s contribution after December 31.

That makes the IRA one of a few meaningful tax moves available to you after the calendar year has already closed.

I suspect the confusion around deadlines comes from the fact that other accounts really are stricter. With a Solo 401k, for example, you generally need the plan in place and your employee deferral elected before the year ends.

Half right, which is a dangerous kind of wrong.

Traditional IRAs DO have required minimum distributions.

Starting at 73, the IRS requires you withdraw a percentage every year whether you need the money or not, and you pay ordinary income tax on it subject to the tax year of distributions.

Roth IRAs DO NOT have required minimum distributions during the original owner's lifetime.

So, you can leave the assets untouched for as long as you live, and SECURE 2.0 extended that same treatment to Roth 401ks starting in 2024.

This is one of the most underrated features of the entire account and hardly anyone factors it into the Roth conversion decision.

A traditional IRA is money the government will eventually force onto your tax return.

A Roth is money that can just sit there compounding, on your schedule, permanently.

(Also worth noting: the money isn't locked until 59½ either. There are more ways to access retirement dollars early than most people realize.)

The tax code does not contain a list of investments your IRA is allowed to hold.

What the code does instead is name a short set of things an IRA can't hold:

Most other assets are permitted by default, including real estate, private notes and lending, private company equity, private funds, precious metals, and crypto.

Which means the narrow menu in your brokerage account was never the law. It was likely a product decision.

Your custodian probably built a platform for public securities because that may have been a clean, scalable, and arguably cheaper business to run.

Holding a rental property or a private fund position inside a retirement account requires a specialty custodian, annual valuations, and paperwork.

So most brokerages simply don't offer it, and often their silence gets absorbed as if it’s a rule.

This is also why the "self-directed IRA" exists as a phrase at all (and its part of why I built my last company Carry.com).

It doesn't describe a special account the government created.

It describes a normal IRA at a custodian willing to let you use the full range that the tax code allows.

Yet, of that $19.2 trillion sitting in IRAs, the Retirement Industry Trust Association estimates that somewhere between 2% and 7% is invested in alternative assets.

So one of the largest pools of investment capital may be over 90% parked inside the slice of the tax code that brokerages found convenient to offer. Go figure!

I don't think that's because tens of millions of people carefully evaluated real estate and private markets and passed.

I think it may have been because nobody ever told them it was on the table.

Now let me play devil’s advocate with the self-directed IRA because, while the freedom is real, so are the tripwires.

1. Prohibited transactions and disqualified persons.

You cannot transact with your own IRA. That sounds obvious until you see how wide the definition of "you" is: your spouse, your parents and grandparents, your children and grandchildren and their spouses, and any entity you control.

So your IRA can't buy a property from you, can't lend to your daughter, can't rent to your business, and you can't write off a weekend renovating a property your IRA owns.

2. The penalty is not proportional.

A prohibited transaction doesn't just unwind the offending investment. It can disqualify the entire account, treating the whole balance as distributed.

This would mean decades of tax-free compounding could be at risk from one transaction.

3. UBTI and UDFI.

If your IRA earns income from an operating business, or uses debt financing, it can generate unrelated business taxable income, meaning your tax-sheltered account owes tax and has to file its own return.

Traditional venture and private equity funds are partnerships that issue K-1s, and a K-1 inside an IRA is often where this problem shows up.

One structural note worth knowing: A fund registered under the Investment Company Act issues a 1099 rather than a K-1, which sidesteps the issue entirely. That’s one of the reasons we built USVC as a 40 Act fund. Structure arguably can matter more than the asset here.

4. The practical friction is real.

Specialty custodian, setup and annual fees, yearly valuations of assets that don't have a market price, and holdings that often can't transfer in kind if you want to switch platforms are some examples of it.

And if you fill a traditional IRA with something illiquid, you may hit 73 and owe a mandatory distribution on an asset you can't readily sell.

A Roth has no required minimum distributions (RMDs), which can make it a better wrapper for anything long-horizon or hard to exit.

The freedom of a self-directed IRA can be real, but so can the ability to vaporize thirty years of compounding with one transaction you didn't know was prohibited.

Which is why I believe the useful version of this conversation isn't "you're allowed to do this." It's "here's how it's actually done, and here's where people get hurt."

On Monday, September 21st at 2pm ET, I'm co-hosting a free live session with Mat Sorensen of Directed IRA.

Mat’s an expert on the rules half: prohibited transactions, disqualified persons, UBTI, custodians, valuations.

I'll take the investing half: what venture actually could look like as a sleeve of a long-term portfolio, and what we're building at USVC to help widen access to it.

What we'll cover:

It’s free to attend. Recording goes to everyone who registers.

Register here →

The IRA turned 52 this year, and for practically all of that time it has been legal to fund one later, for longer, for more people, and with far more inside it than your brokerage may have ever shown you.

Many of the seven misconceptions are a "no" that someone else installed: a rule that's narrower than advertised, a rule that got repealed six years ago, or a menu that was never the law in the first place.

The IRA was never the constraint. The shelf was.

So consider investigating into what your own retirement accounts are actually permitted to do.

Not just what the login screen shows you, but what the rules allow.

Because for most people those can be two very different lists, and the gap between them has been quietly compounding for decades.

Until next week!

— Ankur

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