A lack of trust in the future of Social Security is Americans’ leading motivation for having retirement accounts, according to a new study from Rocket Dollar.
As it currently stands, Social Security is set to run out of funds for full payments by 2034, a year earlier than previously anticipated. With retirement looming closer for some demographics, it’s unsurprising that Americans are exploring options to secure their financial futures outside of government-funded ventures.
Rocket Dollar’s study highlights the subsequent rise in interest surrounding alternative investments in response to this growing need for diversification. One particularly interesting data point revealed through the study shows that 63% of Americans said their lack of trust in Social Security stands as the leading motivator for having retirement accounts.
“This study makes it clear that the public is now looking to utilize their retirement accounts to invest in alternative assets as a way to diversify their retirement savings.”
Rocket Dollar CEO Henry Roshida
“As the insecurity of Social Security becomes more apparent, we are seeing more Americans seeking financial security elsewhere. Every generation of adult Americans believe having a retirement account and being able to contribute to it is important for one’s legacy,” said Henry Yoshida, CEO of Rocket Dollar. “This study makes it clear that the public is now looking to utilize their retirement accounts to invest in alternative assets as a way to diversify their retirement savings. There is a marked need to offer a variety of alternative investments alongside educational assistance to further the public’s understanding of alternative investments available to them.”
The gender breakdown suggests motivators are rooted deeply in individual concerns for financial stability and protection. While men are significantly more motivated than women to have a retirement account in order to reduce their taxable income and have tax-free growth in the future, women are reported to be significantly more motivated due to the uncertainty surrounding the receipt of Social Security benefits and the ability to create a legacy for their futures and the futures of their families.
Growing interest in alternatives
In partnership with The Center for Generational Kinetics (CGK), alternative investment platform Rocket Dollar organized the national study to outline the public’s understanding and interest in retirement savings, alternative assets, and ways to invest along with motivational drivers for investing.
Knowing the importance of diversification for long-term investing, especially when it comes to retirement, 74% of Americans want the option to diversify their retirement account to the investments of their choosing, including alternative investments. Across Millennials, Gen X and Boomers, 53% of all respondents are interested in learning how they can use a retirement account to invest in alternative investments, with younger Millennials being the most enthusiastic about the topic.
General awareness of specific types of alternatives varied by generation. Baby Boomers were noticeably more aware of investment options such as real estate (67%), precious metals (64%), collectibles (58%), and commodities (48%), compared to younger Millennials with regard to real estate (41%), precious metals (31%), collectibles (29%), and commodities (24%). Cryptocurrency had the smallest awareness gap across generations, with 46% of younger Millennials reporting familiarity compared to 51% of older Millennials, and 55% of Boomers.
Welcoming a new era of investors
Overall, the generational interest in investing in alternative assets using retirement accounts suggests a new age of investors is emerging, with 69% of younger Millennials reporting marked interest, followed by 63% of older Millennials and 55% of Gen X participants.
While 45% of the participants currently invest in at least one type of alternative investment, regardless of age, men reported a substantially higher interest in alternative investments with over 51% of male participants investing currently, compared to 39% of women. The study also revealed the fact that cryptocurrency has become the most popular alternative asset across the board, with 15% of Americans now currently investing in crypto, surpassing collectibles (10%), precious metals (9%), and real estate (8%).
This study, “Unlocking the Power of Alternative Investments in Self-Directed IRAs,” analyzes extensive data to understand how best to bridge the knowledge gap between the ultra-wealthy and the average investor. The study included 1,500 U.S. participants (ages 25-80), weighted to the 2020 U.S. Census for age, region, gender, and ethnicity.
SEE ALSO:
• 4 Biggest Social Security Worries Heading Into 2022
• The Ongoing Debate Over Alternative Investments in 401k Plans
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
