Knowing where to place your hard-earned savings for retirement may be daunting and overwhelming. Since the passing of the Employee Retirement Income Security Act of 1974 (ERISA), there has been a proliferation of employee-based and individual-ran retirement saving vehicles. One of those options is a self-directed IRA and may be something that fits your needs.
A self-directed IRA is an Individual Retirement Account that gives you greater control over your investments and allows for more diversification through the inclusion of alternative assets.
With IRA assets totaling $8.8 trillion (33% of US retirement assets) at year-end 2018, more people are realizing the benefits of tax-advantaged savings that set them up for the brightest future. And although “self-directed” implies greater control over where your savings go, nearly 45% of investors still park their money in mutual funds.
Having the ability to invest your retirement savings into alternative assets such as real estate & private equity is not a new concept. The IRS has allowed for it since the creation of the IRA in 1974. But because many custodians (banks and brokerage firms) only offer traditional investments, many are still not aware of the possibilities a self-directed IRA can offer.
It is famously known that millionaires (and billionaires) such as Mitt Romney and Peter Thiel have used their retirement savings accounts to invest in private equity and startups, with the majority of Peter Thiel’s Facebook investment in 2004 coming from his tax-advantaged retirement savings. In tax year 2011 (most recent data), the U.S Government Accountability Office estimated that there were 7,952 IRAs with $5-$10 million, 791 with $10-$25 million and 314 with $25 million +. Some are due to phenomenal investments. Many are due to 401k rollovers. And others are the result of inherited IRAs. It makes you wonder, however, how someone can accumulate so much wealth in an IRA when the maximum contribution limits constrain every saver to $6,000 if you are under the age of 50 and $7,000 if over.
And although these are rare occurrences (nearly 43 million retirement accounts have less than $1 million), it does shed light on what is possible when more control is given to the investor.
If you are considering opening a self-directed IRA and already have a Traditional IRA, SEP IRA, Roth IRA or would like to rollover your 401 (k), Alto offers an easy online solution for you . We make it easy for you to invest your savings into startups, real estate and loans with our partners from AngelList, Wefunder, Groundfloor, Yieldstreet and many more. You can also invest directly with an issuer (someone raising capital) that is not on one of our platform partners websites.
Setting up your account takes no time at all and is 100% online. Now that’s an industry first! It’s never been easier, more transparent and affordable to invest your long-term retirement funds into longer term alternative investments with Alto.
It’s good practice to diversify your retirement portfolio to build wealth that will last for decades after you leave the workforce. Diversification includes traditional investments like stocks and bonds, but these are only a starting point. Read on to find out why diversification is important, what alternative investments can do for your portfolio, and why farmland may be just the asset class you need.
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?