Hidden Retirement Trend Uncovered:
A new national study uncovers unexpected truths about the intersection of IRAs, alternative investments, and rapidly emerging investor trends
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Retirement accounts are a high-profile conversation topic in the U.S. However, one of the most important aspects of retirement planning has been overlooked: the surge in demand for investing in alternative investments through a retirement account.
Until now, most retirement accounts and the conversations surrounding them focused on offering increased access to traditional investments such as stocks, index funds, and bonds. Yet millions of Americans have now recognized the importance and urgency to expand their retirement portfolio by investing in alternative investments such as cryptocurrency, real estate, and private companies.
How strong is the demand for investing in alternative investments through a retirement account? What generations are seeking to take this action? What types of alternative investments do Americans want to access through their retirement accounts—and why? Most importantly: Would Americans invest more money in their retirement accounts if they knew they could access alternative investments?
Answering these questions and many more was the catalyst behind the 2022 State of Retirement Investing in Alternative Assets National Study.
Rocket Dollar and The Center for Generational Kinetics teamed up to uncover, analyze, and understand the desire to invest in alternative investments through retirement accounts, the interest and composition of that demand, and uncovering the new behaviors that drive access to alternative investments in a retirement account. Uncovering these missing insights and data is critical to informing the conversation around retirement and alternative investing as well as help millions of Americans feel more secure and in control of funding their retirement.
What did the national study uncover? Many exciting findings! In this Executive Summary, we share seven research-based insights to inform and advance the conversation about alternative investments going mainstream in retirement accounts.
7 Insights Discovered About Investing in Alternative Investments via Retirement Accounts
The study uncovered that the top two most appealing reasons for investing in alternative investments across America are the ability to “start with little money” and that alternative investments “can produce strong returns.” Breaking down the barrier of requiring large upfront money to invest in alternatives is particularly important and an attractive feature of investing in alternatives in a retirement account.
How much demand exists for education about using a retirement account to invest in alternative investments? The national study found that a majority of Americans (53%) would be interested in learning how they can use a retirement account to invest in alternative investments. Education continues to be a missing link for driving investment in retirement accounts. Providing quality education will be especially important as interest in alternative investing grows.
What would make investing in alternative investments comfortable for America? The # 1 answer was “knowing you can start with a small amount of money and build up over time.” Being able to start where they are with a small amount of money that they can add to over time would most make Americans comfortable with investing in alternatives and could potentially lead to more funding in retirement accounts. The study revealed this to be especially true for older generations.
Of all age groups included in the national study, younger Millennials (ages 25 to 35) are currently investing in almost all types of alternative investments significantly more than all other age groups. This is fascinating given their young age relative to Baby Boomers and showcases the young generation’s enthusiasm for cryptocurrency. Younger Millennials currently invest in cryptocurrency more than any other alternative investment and significantly more than older generations. In fact, the study found that 65% of younger Millennials compared to 31% of Boomers believe cryptocurrency is a good investment.
While cryptocurrency garners much of the headlines in the alternative investing space, the national study uncovered that 81% of Americans believe real estate is a good investment. IRA investment providers would be very wise to meet this demand by offering easy access to a variety of real estate investments.
The study uncovered a surprising insight that many Americans don't invest as much as they could because they don't feel confident in their options. The study discovered that 65% of Americans say they would invest more money if they had more options about where to invest. While there is currently an explosion in alternative investing platforms, many Americans are unaware that they exist and have more options than their advisor or broker is making them aware of.
What most motivates Americans to have a retirement account? The #1 reason uncovered was not being sure one could depend on Social Security. This is particularly important as more and more Americans reach Social Security retirement age and as younger Americans look ahead at their financial future and seek to create a safety net for themselves. It’s clear that having a retirement account and being able to contribute to it is very important across every generation of adult Americans.
The national study uncovered a strong desire to invest in alternative investments through retirement accounts. The desire to invest in alternative investments was fueled by a combination of being able to start small, diversify an investment portfolio, and a general perception that alternative investments are a necessary component of investing. It’s also motivated by a strong recognition that for many Americans they believe they will need to fund their own retirement because they are unsure that they can depend on Social Security.
Analyzing the above insights—and many more to be shared in the national research study’s forthcoming white paper—showed that investing in alternative investments through a retirement account is poised to become mainstream. The trend also shows that the future market for investing in alternative investments through a retirement account is potentially much larger than its current size.
It’s clear that investors are looking for solutions to make these alternative investments easily and safely through existing and new IRAs as well as to build their portfolio, track investment progress, and automate contributions.
Uncovering the tremendous and largely overlooked demand for alternative investing through IRAs signals the start of a new period of investing momentum. This investment demand also presents a tremendous opportunity for alternative asset investors via retirement accounts, alternative investment providers, and both technology solutions and advocates who are making this moment possible.
Henry Yoshida, CFP ®
Co-founder & CEO
Clearly, based on the data, having a retirement account and being able to contribute to it is very important across every generation of adult Americans, and as the impending insecurity of their retirement situation becomes more apparent, many younger Americans are seeking financial security elsewhere. These results make it obvious to us here at Rocket Dollar that contemporary investors are actively seeking new solutions to make investing in alternative assets safe and easy through existing and new IRAs, as well as building their portfolio, tracking their investment progress, and automating contributions. It seems that Millennials and Gen Z, in particular, will need to rely on these savings options now more than ever.
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