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After several relatively quiet years, large initial public offerings (IPOs) are once again attracting investor attention. SpaceX went public in June 2026, and investors are already looking ahead to potential IPOs from several major artificial intelligence companies. Hotly anticipated IPOs often generate considerable enthusiasm among investors of all types, many of whom are eager to participate. But do they make sense to include in portfolios designed to support retirement? More fundamentally, can you or I even access these IPOs to begin with?
Need help picking investments for your retirement portfolio? Consider working with a fiduciary financial advisor.
Can You Participate in an IPO Through a Retirement Plan?
Let’s start with the gating question: Is it even possible for the everyday retirement investor to access IPOs? Like many situations, it depends. In this case, the answer hinges on the type of retirement account you have.
Participants in defined contribution retirement plans, such as 401(k)s and 403(b)s, are unlikely to be able to access an IPO directly. Employers determine which investments are available, typically offering a menu of mutual funds, collective investment trusts, and perhaps model portfolios or managed accounts composed of the standalone fund options selected by the employer. In this case, the only way to participate in the IPO is indirectly, if one of the underlying fund managers buys into the IPO.
The possible exception is if your plan has a self-directed brokerage option. Like traditional brokerage accounts, self-directed brokerage options significantly expand the investments available to plan participants. However, IPO availability ultimately depends on the brokerage firm and your plan’s rules. Be sure to consult both.
Traditional IRAs and Roth IRAs provide much more flexibility than defined contribution plans and will likely be your best direct access point. Depending on the brokerage, you may need to meet eligibility requirements and satisfy minimum asset or investment thresholds, which tend to whittle down the universe of eligible investors.
However, even if you meet the requirements, it doesn’t mean you’re guaranteed an allocation. IPO shares are initially allocated through an underwriting process. The investment bank’s job is to drive interest from institutional asset managers, who generally will receive the vast majority of available shares. Whatever is left is available to the public. Especially with hotly anticipated offerings, expect them to be “oversubscribed,” or have significantly more demand than supply. This may mean you get shut out entirely or you get pro-rated.
I would be cautious about making a substantial commitment simply to gain IPO access. These investments can be volatile, and concentrating a meaningful portion of your retirement savings in one newly public company can expose you to considerable risk.
(And if you have more questions about whether you should participate in an IPO, speak with a financial advisor.)
You May Already Own More AI Than You Think
Before investing in the next major AI IPO, consider how much exposure to artificial intelligence you already have. If you own an S&P 500 index fund, you’re already invested in several companies driving AI development and adoption. In fact, the index’s 10 largest constituents account for nearly 40% of its total weight, with several heavily involved in AI.
And that exposure extends beyond the largest companies, as businesses throughout the index could be affected by AI-related developments and shifts in investor sentiment. Adding a newly public AI company to your retirement portfolio could therefore increase your exposure to a market trend you’re already invested in.
Ask yourself: How much of your portfolio do you want concentrated in a basket of companies with very similar drivers? Many of these companies serve different parts of the value chain, and the winners will shake out over time, so a small element of diversification exists in this AI basket. But the macro drivers are inextricably linked (and many of these companies are directly linked to each other through contracts, financing arrangements, etc.), so their correlation to each other is high. Adding exposure through IPOs will increase your portfolio’s reliance on that theme, and by extension, increase the amount of embedded risk in your portfolio.
(Speak with a financial advisor about the makeup of your portfolio and how much risk it’s exposed to.)
How Should AI IPOs Fit Into Your Investment Strategy?
As with any part of the wealth planning process, I would argue your goals should drive your investment decisions. These goals, along with other factors, like your time horizon, establish your required rate of return and risk tolerance, which ultimately inform how you construct your portfolio. Don’t let the shiny new object or herd dynamics drive decisions!
Under this framework, does IPO participation have a role within your portfolio? If you’re still in the accumulation phase and have decades before retirement, pursuing high-growth opportunities like these could play a larger role in your portfolio, and IPO participation may make sense.
However, if you’re retired or approaching retirement and relying on your portfolio for income, the risks of investing in an IPO deserve closer scrutiny. A steep decline in your portfolio could be particularly damaging when you’re withdrawing money to cover living expenses. These companies also tend to reinvest heavily in their businesses, so don’t expect them to pay dividends to support any income need if you’re in retirement.
If you determine that there is a good reason to participate in an upcoming AI IPO, then be very mindful of position sizing. Some investors size positions by dollar amount, while others will allocate a certain percentage of their portfolios to each holding or use more complex formulas to determine sizing. A prudent approach might size down more volatile stocks to reduce downside risks.
Lastly, consider which account makes the most sense. Taxable brokerage accounts offer flexibility and opportunities for tax-loss harvesting if the investment doesn’t go as you’d hope. However, realized gains will be taxed, so be mindful of your holding period.
Traditional and Roth IRAs have tax advantages, but their withdrawal rules might not be a good fit depending on your goals for these investments. That said, Roth IRAs can be well suited for long-term, buy-and-hold growth investments because investment gains can compound without being subject to annual taxes. Those gains can also be withdrawn tax-free once the account’s five-year requirement and applicable qualified distribution rules are satisfied.
While taxes shouldn’t drive an investment decision, asset location is an important consideration alongside asset allocation in these cases.
(A financial advisor can help with asset location, a strategy that involves placing investments in different types of accounts based on their tax treatment. Connect with an advisor for free.)
Putting it All Together
There’s obviously significant excitement surrounding AI right now, and a couple of highly anticipated IPOs may only fuel that fire further. However, I’d caution against investing in anything solely on the basis of hype and enthusiasm.
Rather, start with your investment objectives, review your existing AI exposure, understand where you are in your retirement pursuit and do your due diligence on the specific companies you’re interested in. Perhaps there’s a good reason to pursue an IPO allocation or maybe you already have enough exposure to the AI industry. Alternatively, it may make sense to wait until there has been time after the IPOs to analyze the price behavior of these newly public stocks.
In any case, the objective is to participate in opportunities aligned with your personal investment goals without jeopardizing the financial security you have established or are working hard to build.
Retirement Planning Tips
- Planning and saving for retirement can often require more than an arbitrary savings goal. To get a better sense of your needs, calculate how much you anticipate spending each year in retirement. This number will be a foundational piece of your retirement plan, because it dictates how much income you’ll need to generate from investments, Social Security and other sources.
- Calculating the present value of your expected retirement expenses can help you establish a savings goal and develop a plan to reach it. Not sure how to do that? Consider working with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.
Jeremy Suschak, CFP®, is a SmartAsset financial planning columnist who answers reader questions on personal finance topics. Jeremy is a financial advisor and head of business development at DBR & Co. He has been compensated for this article. Additional resources from the author can be found at dbroot.com. Please note that Jeremy is not a participant in SmartAsset AMP and is not an employee of SmartAsset.
Photo credit: Photo courtesy of Jeremy Suschak, ©iStock.com/Thitima Uthaiburom