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Why Alto created the Alternative IRA®

January 20, 2021
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Company
updated on
April 15, 2024

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?

  • These modern elder generations will live longer than their ancestors
  • Pensions and other programs seem set to collapse, and are more broadly falling out of favor
  • Individuals are saving less

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.

A different approach: Alternative investments

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 are increasingly turning to private funding methods instead of the public equity markets for their capital needs. Savvy professional investors are increasingly allocating into these private investment opportunities, which often outperform their publicly traded counterparts.  These companies stay private longer, with the largest gains on investment yield typically going to the earliest private investors.

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 institutions manage portfolio risk but may limit returns for investors to a preset performance band.

What’s the way out? Alternative investments, retirement savings, and The Alternative IRA®

True diversification can happen 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.

Why choose The Alternative IRA® from Alto

One way to invest in alternative investments is through a self-directed, 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 can contribute  to 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 the alternatives 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.

Invest in alternative assets using tax-advantaged retirement funds.

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