Learn how alternative assets can boost your 401(k) returns whilst giving you potentially steady retirement income.
According to a recent WalletHub survey, more than a quarter of Americans say their biggest money worry is not having enough saved up for retirement.
In this post, we’ll explain how to use alternative assets in your 401(k) to create a steady stream of retirement income.
Why should I consider alternative assets in my 401(k)?
Alternative investments are becoming a key part of retirement plans. Over 25% of global pension portfolios included alternative investments in 2019, a significant increase from just 5% in 1996. A major factor behind this increase is that diversifying with alternative assets like SBF notes can add stability and growth to your 401(k).
Since these assets aren’t closely tied to stock market fluctuations, they can help protect your portfolio during dips – possibly minimizing potential losses.
Plus, alts also have the potential to yield higher returns, as they can tap into markets and opportunities not accessible through traditional investments.
How to get started with alternative assets in your 401(k)
To access alternative assets, you need a self-directed 401(k). Unlike standard 401(k)s, self-directed accounts allow for a wider range of assets, including alternative investments.
A balanced approach could involve allocating 60% of your portfolio to traditional assets and 40% to alternatives. Here, you could have 60% of your portfolio made up of stocks and bonds, and then split the remaining 40% between private equity deals and merchant cash advances, or some other kind of alternative asset.
But with countless types of alternative assets available, each varying in liquidity and risk, the choice ultimately depends on your own personal investment style.
Take our interactive quiz here to find out which alternative asset is the best fit for you.
How tax deferral can enhance your 401(k) returns
With a 401(k), alternative assets allow you to benefit from tax-deferred growth. By deferring taxes, you allow the entire investment, including any earnings, to grow without immediate tax deductions eating into your returns.
This means you can reinvest a larger amount each year, which leads to compounding growth that can boost your overall gains over the long term.
What can I do now?
When you add alternatives to your 401(k), you diversify and potentially strengthen your retirement income strategy.
If you want to learn more, explore our resources on the Supervestor platform. Or find your best-fit alternative asset with our interactive quiz.
