Why Alternative Investments Like Life Settlements Need a Spot in Your Retirement Portfolio

For decades, the retirement playbook has been short and straightforward: maximize your 401(k), invest in mutual funds, and hope that the market behaves. But if you’re tired of the stomach-churning volatility and underwhelming returns of traditional investing, it’s time to look beyond the crowd. The secret to a truly resilient retirement portfolio isn’t hiding on Wall Street—it’s in alternative investments.

This shift in strategy was the core topic of a recent conversation where host John Golden spoke with Ben Mohr, a veteran institutional retirement strategist. Their discussion exposed the inherent flaws in the “cookie-cutter” approach to investing and highlighted the powerful, non-market potential of strategies like life settlements.

The Problem with the Traditional Portfolio

Why do most people rely almost exclusively on stocks and bonds? Simply put, the financial industry makes it easy. Financial media and institutions heavily promote traditional investments, often creating blind spots for investors. This leads to portfolios that are overexposed to market volatility and severely limited in their wealth-building potential.

The critical takeaway? You need to ask yourself: Are you too dependent on a stock market that could crash tomorrow? As you approach retirement, understanding and mitigating this market dependency is the most critical step you can take.

Unlocking Alternatives with a Self-Directed IRA (SDIRA)

The first step in diversifying your retirement savings is gaining access to non-market assets, and the most effective tool for this is the Self-Directed IRA (SDIRA).

Unlike a standard IRA or 401(k), an SDIRA allows you to invest in a much wider range of assets, including real estate, precious metals, private businesses, and crucially, life settlements. You maintain the tax-deferred growth benefits, but you take control of the investment decisions, moving away from the confines of a typical fund manager.

Actionable Step: If you have an “orphaned” 401(k) from a previous job, consider rolling it over into an SDIRA. Then, look for a reputable custodian (like the IRA Club mentioned by Ben Mohr) that specializes in holding these non-traditional assets.

Life Settlements: True Diversification Hiding in Plain Sight

For years, the life settlement market was the domain of ultra-wealthy individuals and large institutional investors. Now, it’s accessible to the everyday investor, offering a unique opportunity for uncorrelated returns—meaning the investment is not tied to the performance of the stock or bond markets.

What is a Life Settlement?

A life settlement is simply the purchase of an existing life insurance policy from a policyholder—typically a senior—who no longer needs the coverage. The investor pays the policyholder a lump sum (which is more than the cash surrender value) and takes over the premium payments. When the insured passes away, the investor receives the full death benefit.

Why Consider Them?

• Attractive Yields: Historically, these investments have delivered annualized returns that often range from 8% to 12%.
• Known Payout: Unlike stocks, where returns fluctuate daily, a life settlement has a defined end goal: the full death benefit. The only variable is the timeline.
• Institutional Track Record: Major financial players, including companies owned by Warren Buffett, have been involved in this asset class for decades, lending it substantial credibility.

Important Note: Life settlements are an illiquid investment. This is not a place to park emergency funds. Returns are realized over several years as the policies mature, which demands a different, more patient mindset. Experts like Ben Mohr recommend limiting your exposure to 5–10% of your total net worth.

The Final Mindset Shift

Moving into alternative assets requires you to adopt a new mindset: one of patience and long-term focus. You trade daily volatility and instant liquidity for the peace of mind that comes with a non-market, defined-outcome investment.

If you are tired of the daily market roller coaster, a strategically diversified portfolio that includes alternatives like life settlements could be the key to building the resilient retirement you’ve always wanted. The world of investing is bigger than Wall Street suggests—it’s time to start exploring it.