Buried Treasure: Nearly $1.4 Trillion Revealed In Old 401Ks

By iTrustCapitalOctober 21, 20223 minutes read
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The cryptocurrency industry remains a unique investment opportunity in a volatile economic period. As we grapple with inflation, rising interest rates, and a slowdown in the housing markets, you may be considering various options for how to invest.

Many investors are sitting on an old 401(k) and don’t know where to put the funds during what they expect to be a down period in the stock market. That could lead to a search for alternative asset categories for retirement account investments. Here’s a closer look at what’s happening in the markets and alternative investments you may want to know about as you research the best investments for your unique needs and goals.

There’s no crystal ball telling us what will happen next in the stock market. Many with an old 401(k) or IRA account have shown interest in alternative investments such as crypto. Here’s a snapshot of what’s happening and how investors are reacting.

What Investors Are Doing With 401(k) Plans

According to a study done by Capitalize, nearly 25 million old 401(k) accounts sit in former employers’ plans. Those accounts collectively hold $1.35 trillion in assets. That is a significant portion of the approximately $6.7 trillion in 401(k) plans. The same data indicates the average old 401(k) balance is around $55,400.

Keeping money in an old employer’s 401(k) could be costly for investors, depending on the account fees and how the funds are invested. Investment analysis shows investors selling from target date funds and U.S. equity funds. During the same period, data shows that traditional investors have sent cash into stable value funds and money market funds.

Spending just a few moments reading the latest headlines tells you a lot about what’s going on in the economy in the United States. We’re grappling with the highest inflation rates in the U.S. in decades. To bring down inflation, the Federal Reserve is raising interest rates at an unprecedented rate, creating shockwaves in the economy.

Investors are showing hesitation about the future of the stock market, as is demonstrated by volatility and irregular swings in stock prices. The Fed’s raise of interest rates is intended to slow down borrowing and the housing market, which may cool the economy into a period of contraction.

However, as savvy investors know, those aren’t the only places to invest. Many choose to roll over their 401(k) into a self-directed individual retirement account (IRA) where they can choose from a wider range of investments.

Alternative Investments to Know About

Alternative investments are any type of investment outside of the traditional investment markets. While the IRS limits what you can buy within an IRA, there are plenty of options to consider. Whether or not an investment makes sense is up to you or your financial advisor. Decisions can be based on your goals, the amount of money being invested, and risk tolerance, among other criteria.

Cryptocurrency IRA

A cryptocurrency IRA enables investors to buy Bitcoin, Ethereum, Polygon, and other cryptocurrency assets with the same tax advantages of a traditional IRA or Roth IRA. After all, a cryptocurrency IRA is simply an IRA with a different menu of investment opportunities. 

iTrustCapital offers Crypto IRAs that support a mix of cryptocurrency coins and tokens held in a custodial account under your name, with no lending or leverage taking place with client assets. 

In addition to the potential to earn from higher crypto prices, iTrustCapital investors are the first in the Crypto IRA space that can earn from cryptocurrency staking.

As of the date of this article, investors can earn up to 9.5% APY staking Polkadot (DOT) within their Crypto IRAs at iTrustCapital, with plans to add more asset options in the future. Plus, the accounts are available with no monthly fees.

Other Alternatives

Cryptocurrency is one of an array of alternative investments. Here are others you may find interesting:

  • Real Estate IRA: Several companies offer real estate funds or direct real estate investments in a retirement account. Consider interest rates and the future of the real estate market when evaluating these options. Management fees generally apply to these investments, cutting into your long-term gains.

  • Precious Metals IRA: Gold and silver are popular investments when investors expect stock market or currency troubles. Precious metals may be through an IRA investment service, typically for a fee. 

iTrustCapital actually offers gold and silver within their accounts as well as crypto, and still charges no monthly fee.

Wondering where the alternatives stop? According to US law, investors are forbidden from investing IRA funds in collectibles or life insurance. The IRS includes artwork, rugs, antiques, some metals, gems, stamps, most coins, alcoholic beverages, and many more items within the list of materials that are not allowed.

The Bottom Line

The economy and investment markets are always shifting. While nobody knows what’s coming next, many investors are looking at alternatives as an opportunity to diversify their portfolios. A well-researched investment plan is often the best strategy to invest with confidence for years to come.

DISCLAIMER

This article is for information purposes only.  It does not constitute investment advice in any way.  It does not constitute an offer to sell or a solicitation of an offer to buy or sell any cryptocurrency or security or to participate in any investment strategy.  

iTrust Capital, Inc. is not an exchange, funding portal, custodian, trust company, licensed broker, dealer, broker-dealer, investment advisor, investment manager, or adviser in the United States or elsewhere. iTrust Capital, Inc. is not affiliated with and does not endorse any particular cryptocurrency, precious metal, or investment strategy.  

Cryptocurrencies are a speculative investment with risk of loss. Precious metals are a speculative investment with risk of loss. Cryptocurrency is not legal tender backed by the United States government, nor is it subject to Federal Deposit Insurance Corporation (“FDIC”) insurance or protections. Clients do not receive a choice of custody provider. The self-directed purchase and sale of cryptocurrency through a cryptocurrency IRA have not been endorsed by the IRS or any regulatory agency. Historical performance is no guarantee of future results.  

Some taxes and conditions may apply depending on the type of IRA account. ​​Investors assume the risk of all purchase and sale decisions. iTrust Capital, Inc. makes no guarantee or representation regarding investors’ ability to profit from any transaction or the tax implications of any transaction. iTrust Capital, Inc. does not provide legal, investment or tax advice. Consult a qualified legal, investment, or tax professional. 

iTrust Capital, Inc. makes no representation or warranty as to the accuracy or completeness of this information and shall not have any liability for any representations (expressed or implied) or omissions from the information contained herein. iTrust Capital, Inc. disclaims any and all liability to any party for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising directly or indirectly from any use of this information, which is provided as is, without warranties.

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