According to a brief issued by the Center for Retirement Research at Boston College, millennials may face unprecedented challenges when their golden years roll around. A combination of high student loan debt, rising home prices and healthcare costs, a competitive job market, and the uncertainty surrounding future social security benefits could put today’s high-20s, low-30s population in a considerable bind.
However, as the brief astutely points out, millennials still have their entire lives to build self-directed retirement accounts. Long-term success is predicated on kicking the tires as soon as possible, but millennials must overcome the psychological barriers of starting small. Marginal returns for the first several years may discourage young investors with short lines of sight, but as a wise person once said, every journey begins with a first step.
Let’s review some alternative investment options that millennials can pursue with the lower IRA balances that fewer years in the work force typically provide:
- Private Equity – There are plenty of opportunities to acquire privately traded shares in up and coming companies. Such opportunities are even more plentiful with the rise of equity crowdfunding and the increased integration of self-directed IRA platforms with asset providers. Thanks to Title III of the JOBS Act, non-accredited investors (i.e. those with smaller bank rolls) can take advantage of the same online offerings as those with deeper pockets.
- Private Lending – If you’re unable to find a borrower for your smaller account balance or you’d rather not put all of your eggs into one basket, online platforms allow investors to purchase fractional debt in a similar manner to crowdfunding. These platforms issue larger loans to individuals or businesses that need capital. Meanwhile, investors acquire small portions of those loans and yield a proportional share of the interest. In some cases, you can get involved with these platforms for $500 - $1,000 minimum investments.
- Real Estate – Just as you can buy shares in a private company through crowdfunding websites, you can buy equity in residential or commercial real estate as well. If partial ownership doesn’t interest you, your IRA can seek a hard money loan to finance all or a significant portion of a full real estate deal. From there your IRA can earn money from rental income, fix and flip deals, or any of the other possibilities available through property investments.
- Precious Metals – With gold hovering around $1,300 per ounce, silver fluctuating between $16 and $18 per ounce, and platinum and palladium each bouncing around $1,000 per ounce, a smaller budget can be allocated toward these physical holdings if you so choose. You can also look into fractional options like 0.1-ounce, 0.25-ounce, and 0.5-ounce items.
While New Direction IRA does not recommend or endorse any particular course of action, we’re always happy to discuss alternative IRA investments regardless of your account size. For more information about self-directed IRA investing, please don’t hesitate to contact our office.