A greater number of Americans say they would rather invest in alternatives than trust in the stock market to grow their retirement savings.
Research from Alto, a self-directed individual retirement account (IRA) platform for private markets and alternative assets, this week released its whitepaper report, “Tomorrow’s Retirement is Here: Why Alternatives Are No Longer Optional,” finding that only 12% of investors believe the current market will support their retirement.
Gen Xers, who are nearing retirement within the next decade, reported a median retirement savings of just $82,000, compared to $289,000 for Baby Boomers. Given that most Americans expect needing a reported $1.5 million to live comfortably in retirement, more in the sandwich generation could be choosing alternatives to advance their savings, Alto projects, especially as retirement remains a top priority for this age group.
As a result, a higher number of respondents are considering moving investments to the private market. Alto’s research shows that two-thirds of surveyed investors have allocated some funds to private markets and alternative assets, and 82% plan to increase their allocations within the coming six months.
“The investing playbook no longer fits the way we are planning for retirement,” said Eric Satz, Founder and CEO of Alto, in a statement. “As an industry, we have a responsibility to evolve to empower investors with greater choice, more flexibility, and the tools to take control of their financial futures.”
Alto’s research also called for an increase in educational resources tailored to alternative investing, as these funds potentially make their way into retirement plans. Nearly half of investors surveyed in the findings admitted to not knowing their options in the alternative market.
Plus, despite planning to incorporate private market funds in their savings strategy, most Baby Boomers (74%) and Gen Xers (60%) reported allocating less than 5% of their portfolios to alternatives, while 63% of Millennials and 56% of Gen Zers reported zero allocations to alternatives. Respondents cited regulatory concerns, potential risks, and a limited knowledge on the private market as reasons for their hesitancy.
The research comes as President Donald Trump is soon expected to sign an executive order that would explore allowing private equity investing in retirement plans. In its findings, Alto notes that today’s public market can no longer support retirement readiness, adding that all age groups could benefit from the potential growth that private markets may add.
“Retirement success today demands more than what public markets alone can offer. For Gen X, time is becoming a more limited resource for building the growth and diversification needed to close the gap. For Millennials and Gen Z, access and education remain key barriers to long-term planning,” researchers write in the report. “Yet across all age groups, there’s a growing recognition that traditional models may no longer be enough—and alternative investments are increasingly viewed as part of the solution.”
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