Alternative Investments

How to Use Alternative Investments for Retirement Income in a 401(k)

Alice Wilson October 28, 2024

Learn how alternative assets can boost your 401(k) returns whilst giving you steady retirement income.

 

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Thinking about adding alternative investments to your 401(k)? Keep reading to learn how you can make this work for you

 

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.

 

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The sooner you include alternatives in your 401(k), the more you can benefit from compounding interest and tax-deferred growth

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.

This information is being furnished solely for informational purposes. This material does not constitute an offer to buy or sell, or a solicitation of an offer to buy or sell, any security. This does not constitute and must not be construed as investment advice. Investing involves risk and possible loss of principal capital. Potential investors must rely upon their own examination of the merits and risks involved. Comments by viewers or third-party rankings and recognitions are no guarantee of future investment outcomes. Supervestor, LLC (“Supervestor”) has a reasonable belief that the content posted by a third-party does not contain untrue statements of material fact or misleading information. The opinions expressed herein are those of Supervestor and are subject to change without notice. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions, and may not necessarily come to pass. Certain statements included in these materials, including, without limitation, statements regarding investment objectives and strategies, and statements as to Supervestor’s beliefs, expectations or options may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are subject to risks and uncertainties. Actual results and developments could be materially different from those expressed in or implied by such forward-looking statements. Charts are for illustrative purposes only and are not to be relied upon as investment advice. Unless it is explicitly identified otherwise all returns information presented herein is net of applicable fees and expenses.