Americans aim for retirement and a secure future to afford whatever they would like.
A nice beach condo.
A boat at the marina.
The chance to travel in style.
That dream of retirement has persisted in America for several generations. But it could be over for many Americans because of a pending crisis: elder poverty.
By the year 2035, nearly 20 million retirees could be in poverty. By 2050, that number could be 25 million, which rivals the elderly poverty numbers of the Great Depression. Gen-X and Millennials are the generations that will experience this firsthand.
Why is this the case? Why is elder poverty on the rise?
Add all of these factors together and you have a recipe for disaster.
However, there are options beyond what many are currently doing with their retirement savings.
One way to help solve the gap of elder poverty is to utilize an alternative to traditional investing options for retirement and instead diversify your retirement investments with other asset classes. Why? There are few outsized returns left for the individual public market investor because there are fewer publicly traded companies today than there were in 1976 even though the U.S. gross domestic product has tripled in size and there are a greater number of companies. So why are there more companies contributing to the economy but not participating in the public markets?
Companies have turned to private equity instead of the public equity markets, and savvy investors are clued into these private investment opportunities which often outperform the publicly traded ones. These companies stay private longer and the largest gains go to those who invest when the companies are private.
Compounding this problem is that robo investors and their real-life human counterparts usually offer a mix of the same ETFs and investment funds, which are then composed of the same basket of companies offering the same results. This passive investing, market index type of diversification, helps manage portfolio risk, but limits returns.
True diversification happens with assets whose performance is uncorrelated to, or outside of the public markets. And if Americans are going to retire and live above the poverty line, then they need access to investment opportunities with outsized return characteristics.
The SEC and Department of Labor are taking strong steps in the right direction to broaden access to alternative investment opportunities and level the playing field for the everyday investor. The JOBS Act, Title III and Regulation CF have made it possible for any investor to invest in an alternative asset, but it remains too expensive, complicated and time-consuming for the average individual to do so with an IRA - which, by the way, is where most of us have our savings.
One way to invest in alternative investments is through a self-directed, alternative IRA. A self-directed IRA allows individual investors to choose how they want to invest retirement savings in holdings other than stocks and bonds where traditional IRAs park capital. Alternative investments can include private equity, real estate, venture capital, notes and loans, digital assets, and other commodities.
An investor can make contributions to their IRA and then select their preferred alternative investments, all while utilizing the tax advantages of an IRA.
Alto believes that everyone who wants to retire should have the tools and resources to accomplish this goal. A culture that empowers people to save and invest in one’s financial future creates a thriving society. It’s why Alto was founded. In 2015, Alto CEO Eric Satz asked himself a straightforward question: "Can I make a private company investment using my IRA money?"
The simple answer was yes, but the process was anything but. Eric encountered huge roadblocks along the way, including intense individual research, risk committees with ever-changing processes, lots of paperwork, and significant fees. Knowing there was a better way to make these investments and an opportunity to empower people to take control of their retirement savings, Alto was born.
Since then, Alto has been on a mission to help people use their savings to invest in what they choose, educate everyone on their investment options, offer tools that are easy to use, and provide transparency throughout the process. Alto represents a new standard of what your IRA should be.
To accomplish this, Alto offers:
Alto wants The Alternative IRA™ to do for the everyday investor what TurboTax did for self-filers.
To start investing in your own Alternative IRA, open a free account with Alto today and only minimum fees. You can then transfer funds and invest in opportunities to diversify your retirement portfolio.
What do institutional investors invest in? Alternative assets. They are a growing part of their diverse portfolio and are willing to take the risk.
Alto had its first Covid period board meeting last week. Like many companies, we considered our strategy in light of the new world order.Our strategy -- to provide affordable access to alternative investment opportunities for everyone – remains unchanged.