A 401(k) is an excellent way to invest your money, especially if you’re looking for a tax advantage with your retirement savings.
However, some student loan borrowers with a high income or net worth may be interested in alternative investments that could outperform the market.
Thanks to new investment companies and alternatives, there are plenty of opportunities to invest for retirement outside of your 401(k). Here are our top seven choices.
1. Individual Retirement Accounts (IRA)
Before you get too focused on alternatives, make sure you have a well-rounded retirement plan.
401(k) plans are tied to an employer and use pre-tax dollars. That means you don’t pay income taxes on contributions. But, you do pay taxes when you withdraw during retirement.
A Traditional IRA is similar. Although it is self-directed and independent of your employer, it uses pre-tax dollars just like a 401(k).
While a Roth IRA is also independent of your employer and uses post-tax dollars, you end up paying income taxes on contributions but not withdrawals.
In addition to common investments like an S&P 500 index fund with a brokerage firm, some non-traditional investments can happen under the umbrella of an IRA or Roth IRA.
For example, a peer-to-peer lending marketplace like Lending Club supports IRA accounts.
The annual limit to contribute to both a traditional IRA and a Roth IRA is $5,500.
2. Marketplace business lending
Many investors are familiar with sites like Lending Club as an option for peer-to-peer lending. But what about the lucrative business loan industry?
There are some new investment companies that allow investors to lend to brand new and growing businesses.
One such marketplace is Funding Circle. It’s a small business loan platform based out of the United Kingdom that matches investors with businesses in need of capital for expansion and operations.
Funding Circle advertises that more than 47,000 investors have participated so far investing in 15,000 businesses. To invest through Funding Circle, you must qualify as an accredited investor under Federal guidelines.
3. Angel investing and venture capital
When brand new companies look for their first seed funding, they typically look to a wealthy angel investor or venture capital fund.
Traditional angel investing requires a one-on-one relationship with the business that’s looking to borrow money. That’s why investing in a venture capital fund is traditionally limited to wealthy, well-connected investors.
However, new investment companies are giving would-be investors a new option.
For example, Founders Club allows investing in a portfolio of vetted Silicon Valley startups through an easy-to-use online platform. 17,000 accredited investors look into funding startups that have made their way through highly regarded incubators like Y-Combinator.
Investments with the Founders Club start at $3,000 and can be directed toward a specific startup, or a pool of 10 to 15 companies to diversify risk.
4. Real estate
Until recently, there were only a couple of common ways to invest in real estate.
You could invest directly as a property owner. Or, invest in a real estate investment trust (REIT) that manages properties and pays investors a dividend.
New investment companies like Fundrise offer a new method to invest in real estate. In 2015, investors were able to place funds in real estate projects that yielded a 13% return. Investments started at $1,000.
The Fundrise platform invests in mid-size real estate projects that are too expensive for fix-and-flip investors, but too small for large institutional investors.
Target projects for Fundrise are in the $5 million to $100 million range through what they call an eREIT. Fundrise is open to accredited investors only.
5. Oil and gas
The oil and gas markets have gone on quite a ride over the last couple of years.
Oil’s price peaked at $147.27 per barrel in 2008 and fell below $40 per barrel in February 2009. Prices currently remain low, leading to less expensive gas prices at the pump and lower profits for oil and gas production companies.
If you think oil is on the way up, you can invest by buying stock in an oil and gas company, investing in a limited partnership, or buying the commodity through futures contracts.
Keep in mind that commodity prices can be quite volatile, though, and may make for a risky investment.
6. Solar energy projects
Investment company Wiser Capital offers a solution for investors looking to bankroll solar projects and earn a profit from their investment.
Wiser runs a proprietary platform to quickly assess the viability and profitability of prospective solar projects. It also connects accredited investors with solar power investment opportunities.
7. Secured loans
New investment companies like YieldStreet offer an opportunity to invest in a wide variety of secured loans, including loans backed by residential real estate, pending legal settlements, or even a fleet of Uber cars.
Starting at $5,000 for a one- to three-year loan, accredited investors can put their funds to work on a platform that’s generated 15.43 percent annual returns.
The platform has funded $35 million in investments with 23 different loans to-date.
Be thoughtful with every dollar invested
All investments come with some level of risk, so always invest with care.
Read the prospectus for any investment so you understand the risks, possible returns, and other pertinent information.
If you have any doubt, you can always invest in a sure thing: yourself.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 5.87%1||Undergrad & Graduate|
|2.47% – 8.03%4||Undergrad & Graduate|
|2.95% – 6.37%2||Undergrad & Graduate|
|2.48% – 6.25%5||Undergrad & Graduate|
|2.72% – 8.32%6||Undergrad & Graduate|