Self-Directed IRA’s are at Risk due to Potential Congressional Action


The House of Representatives version of the Build Back Better legislation was passed on November 19th.  The measure now moves to the Senate where additional changes are likely.

The House version does not include the original language in sections  138312 and 138314 that would have negatively impacted self-directed investors.

Several provisions in the original draft that impact Roth IRA strategies and high-income IRA participants have been reintroduced.  These include:

  • Prohibition of the “Back Door” Roth contribution strategy using non-deductible IRA or 401(k) contributions.  This will be prohibited beginning in 2022.
  • Roth Conversions prohibited for “High Income” individuals with over $400K AGI if single or $450K AGI if married.  This limitation would become effective in 2032.
  • Cap on IRA plans at $10 Million with forced distributions above that threshold.  This new rule would begin in 2028.


Per the modified “Framework” for the Build Back Better Act presented by President Biden on October 27th, all proposed retirement plan changes have been dropped from the FY2022 Budget Act.  Until the final law is signed, there is remaining uncertainty, but it seems unlikely these proposals will become law.


On September 13th the House Ways and Means Committee released proposed language for the FY2022 Federal Budget that will impact IRA plans.  These changes will limit investor choice going forward, and will force some investors to sell or distribute investments they have already made by December 31st, 2023.

We urgently need your help to stop these proposals from becoming law.

This is a fast-moving situation.   We will be updating this page with information as the situation progresses.

The #1 Most Important Thing You Can Do

The most important thing to do RIGHT NOW is to contact your representatives in congress and educate them on the harm this misguided set of rules will create. 

This is true whether you are an investor who will be impacted, an investment provider who accepts IRA money into your deals, or just an investor who believes in the concepts of diversification, choice, and control.

Resources and guidance for how to advocate against these changes is included below.

What is in the Bill?

As part of the budget bill, the House Ways and Means Committee is proposing several changes to IRA retirement plans.  At this time, 401(k)s and other qualified employer retirement plans are not impacted.

The stated goal of these changes is to prohibit abusive strategies that utilize IRA plans as a tax avoidance tool, rather than a true retirement savings tool.  You may have heard about Peter Thiel who used $2,000 of Roth money in a very aggressive transaction (that probably would have been deemed a prohibited transaction if discovered before the statute of limitations ran out) to create a $5 Billion tax free piggy bank.  Well, Peter Thiel’s greed may kill your self-directed IRA.

Several of the proposed changes make sense.

Two sections of the bill are not necessary to curb abuses and will harm average investors.  They need to be removed.

Section 138312 will prohibit IRA investments in assets that require an investor be accredited, have a minimum amount of income or assets, have completed a specific level of education, or hold a specific license or credential.

This will apply to most real estate syndications, private placements, crowdfunds, and non-public real estate or debt funds.

Section 138314 will prohibit IRA investments in corporations, partnerships, unincorporated entities like LLCs, or trusts if the IRA account holder personally holds 10% or greater equity interest, or holds the role of officer, director of equivalent.

This will impact some private equity investments and will also apply to the “checkbook IRA” strategy of an IRA owned LLC or trust where the IRA account holder is the manager/trustee.

Other proposed changes will limit the ability of high-income individuals to make Roth IRA contributions or perform conversions.  There is also a proposal to cap the size of IRA plans at $10M.  (Safeguard has exactly zero clients who will be affected by that one).  Those provisions may not make a few people happy but are actually in line with the stated goal of an IRA being a tax-advantaged savings vehicle for the middle class, not a tax avoidance mechanism for the wealthy.

Read for Yourself

Here is the Ways and Means Committee Summary

Here is the full text of the bill

What Happens if this Becomes Law?

Going forward, this will limit investor choice.  These new rules run contrary to actions such as the 2012 JOBS act and recent changes made by the SEC to expand the definition of accredited investor – both of which were intended to level the playing field by giving more investors access to high performing and stable assets previously limited only to the well off.

More importantly, there is the potential for a significant impact on existing IRA holders who have made investments that will no longer be allowed.  The rules allow a two-year grace period until December 31st, 2023 to exit such investments.

There will be two possible exit strategies:

  • Distribute the asset from the IRA and potentially pay taxes and/or early distribution penalties if under the age of 59 ½.
  • Sell investments before that deadline.  Most non-traded investments have longer terms than two years and may be illiquid and difficult to sell.  Expect that significant discounts may be necessary.  Guess who will be ready to scoop up those discounted assets?  The very same wealthy people these rules are designed to limit.

Holders of a checkbook IRA program will need to restructure their plan but will not be forced to liquidate assets other than those that require accredited investor status.

What Should I Do?

Firstly, do not panic.  This language is not yet law.  While the process is moving quickly, there is a long and uncertain path ahead of this legislative package.

Do not sell investments or close your plan.

You may choose to hold off on making new investments into assets that require accredited investor status until there is more certainty.


The most important thing to do – IMMEDIATLEY – is to contact your representatives in congress. Do it TODAY!


How to Contact Your Legislators

Following are links to identify your House Representative and Senators.

Find your Representative

Contacting your Senators

Guidance for communicating with your elected officials is included on the linked pages.

We strongly recommend that you take the time to call or send a physical letter.  While email is not necessarily as effective, yes, send emails too.

What Should I Say?

Your communications should be clear, respectful, constructive, and short.  If you are writing, keep it to 500 words or less.  Here are some great tips from the American Psychological Association on how to craft an effective letter.

Be sure to reference the specific sections of the law: “Sections 138312 / 138314 of the FY2022 Budget Resolution”.  Include this language in your title or subject line.  Staffers use the volume of letters on a specific topic to gauge voter concern.

Speak about your own situation and chosen investments, how they are designed to help you secure and grow your retirement savings, and how this set of rules will cause you harm.

Make it personal.  Show the value your investments create in the community by providing safe housing, supporting innovative new ventures, or whatever the case may be.

We need to show our legislators that normal people benefit from these strategies, not just the ultra-wealthy.

Sample Letters

Following are sample letters you can use as a template to tell your own story.

Sample for Section 138312 – Accredited Investment

Sample for Section 138314 – Checkbook IRA invested in a rental


Frequently Asked Questions

Coming Soon.  We’ll provide more detail on what investments may be impacted and possible measures to mitigate the damage.