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Why Investing is More Important Than Ever for Millennial Retirement

Learn about the investment benefits and challenges of the millennial investor, and why it's so important to start investing early.

Posted on March 7, 2024 by Sarah Shellam


The millennial generation, those born between 1981 and 1996, make up a significant portion of the US population. According to the US Census Bureau, there are 77.12 million millennials in the US, making up 23.6% of the overall population. With such a large demographic, it's important for millennials to be well-informed about investing, particularly in regard to benefits plans. Investing for millennials can be a tricky process. Many are burdened with student loan debt and the high cost of living, making it difficult to save and invest for the future. However, it's important for millennials to start investing early to build wealth and secure their financial futures. With the increasing cost of living and student debt, one option for millennials to build wealth over time is private investments.

Alternative Investing Options

Private investments, also known as alternative investments, are investments that are not traded on public stock exchanges. They include investments such as real estate, private equity, promissory notes, private LLCs, cryptocurrency, venture capital, and much more. While these investments typically have higher minimum investment requirements and are more exclusive than traditional stocks and bonds, they can offer significant potential returns, as well as other attractive options for several reasons.

  • Alternative investments offer the opportunity to diversify millennial portfolios.
  • They can potentially earn higher returns than traditional investments.
  • Private investments tend to have a lower correlation to the stock market.
  • Less market involvement helps mitigate risk in a downturn.

Know Your Company Retirement Benefits

One way for millennials to gain exposure to private investments is through their benefits plans. Benefits plans, including the 401k and pension plans, are critical components of retirement savings. However, many millennials are not fully aware of the benefits of these plans, or how they work. In fact, a survey by the Transamerica Center for Retirement Studies found that only 16% of millennials are "very confident" in their knowledge of retirement planning. That's why benefits plans are more important than ever for millennial investors. These plans offer significant tax advantages and can provide a reliable source of retirement income. Many employers offer 401k plans that allow employees to invest in private assets and many of these employers offer matching contributions, which can help employees maximize their savings.

Open a Self-Directed IRA

For millennials who are self-employed or do not have access to employer-sponsored retirement plans, there are other options for investing in private investments, like self-directed IRAs. A self-directed IRA is a retirement account that allows investors to choose from a wider range of investment options than traditional IRAs, including alternative assets like real estate, private equity, and more. Because there are numerous self-directed plans to choose from, millennials have options, though the Roth IRA is arguably the best.

Contributions to a Roth IRA are made with after-tax dollars, meaning withdrawals are tax-free once you hit retirement age. This is advantageous for millennials who are likely to be in a lower tax bracket now than they will be in retirement.

Benefits of Being a Millennial Investor

Financial Timelines and Technology

Millennials generally have a longer investment horizon than older investors, as they have more time to save and invest before retirement. This longer investment timeline allows for more aggressive financial strategies and higher risk tolerance, which can be better suited for self-directed IRAs that offer more alternative investment options. They are also comfortable with technology, and while this might not seem important, it plays a big role. Millennials have grown up with technology and are generally more comfortable using online platforms and tools. Self-directed IRAs are typically managed online, which can be more convenient for a tech-savvy generation of investors.

Autonomy and Investment Control

Millennials are also known for their entrepreneurial spirit and desire to take control of their financial future. Because self-directed IRAs offer more autonomy and control over investment decisions, they can be appealing to millennials who want to take a more hands-on approach to their retirement savings. And, of course, we've mentioned that self-directed IRAs offer a wider range of investment options, which can be particularly appealing to millennials who don't want to follow in the footsteps of their parents, simply investing into what they had always been told to, like stocks and mutual funds. Self-directed plans are the perfect vehicle for millennials who are interested in alternative investments and want to build a more diversified portfolio.

Starting Small in Accessible Investments

Using a self-directed IRA to build wealth for the future does not necessarily need a lot of money to start! While some alternative investments may require a significant amount of capital to get started, there are many private investment options that can be accessible to investors with smaller amounts of money. For example, real estate options allow individuals to invest in real estate properties with as little as $500, and other investments like private loans can be structured in a variety of ways, including short-term loans that might only require small amounts.

Millennial Investment Challenges

With all the benefits that self-directed investing can offer, some people may be wondering why every millennial is not investing already! That is because millennials also face numerous challenges. Many millennials are burdened with high levels of student debt, which can make it difficult to save and invest in the future. This can delay the start of their investing journey and limit their ability to take on riskier investments that may offer higher returns. Millennials also came of age during the 2008 financial crisis and have experienced a challenging economic landscape in the years since. Often earning lower wages than previous generations at the same age, it can be difficult to save and invest for the future. It can also limit their ability to take on more aggressive investment strategies and pursue higher-risk, higher-reward investments.

One challenge millennial investors are experiencing is “quiet quitting”. Also known as the silent resignation, quiet quitting refers to an employee leaving their job without making a formal announcement or giving any notice to their employer, usually because of dissatisfaction with the job or company culture, feeling undervalued or underpaid, or having found a better job opportunity elsewhere. According to a Gallup poll, 50% of workers have engaged in quiet quitting at some point in their careers.

While many millennials might think quiet quitting is the answer to their problems, that couldn't be farther from the truth. Quiet quitting can have serious consequences for retirement savings, particularly if employees have not vested in their benefits plans. For millennials who engage in quiet quitting, benefits plans can be particularly valuable. When employees leave a job without vesting in their benefits plans, they may lose out on significant retirement savings. However, if employees stay with an employer long enough to vest in their benefits plans, they can take those benefits with them when they leave. This can provide a valuable source of retirement income, even if employees switch jobs frequently.

How Can Millennials Take Advantage of Private Investing?

With proper education and planning, millennials can take advantage of these plans and build wealth over time through private investments! Take advantage of free consultations and education with self-directed IRA specialists or talk to a financial advisor to develop a wealth building strategy that fits your goals. To learn more about starting a self-directed IRA, reach out to a Quest representative or schedule a 1-on-1 consultation with an IRA Specialist today .

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