Do Your Future Self a Favor—Invest for Retirement
Will you outlive your retirement savings? According to the Social Security Administration, about one out of every four 65-year-olds will live past age 90,1 yet one-third of Americans have no retirement savings.2 Imagine working until you’re 90 because you don’t have the money to retire! What’s more, among millennials, the number of those who haven’t saved for retirement jumps to 66%.3
These statistics may shock you, but the good news is no matter your age, it’s never too late (or too early!) to start investing for retirement. Beyond well-known employer-sponsored retirement plans like 401(k)s, you can also invest for your future through an Individual Retirement Account (IRA).4
Consider making a LendingClub IRA part of your retirement strategy
By investing through a LendingClub IRA, you can diversify your retirement portfolio with consumer credit, combining the potential to earn competitive returns5 with the potential tax advantages of an IRA.
Diversify your portfolio beyond stocks and bonds
You’ve heard it before, “don’t put all your eggs in one basket.” By spreading your retirement funds across various asset classes, you may reduce the risk any one asset class poses to your entire portfolio.
Through a LendingClub IRA, you’ll have investment exposure to consumer credit. The most common examples of consumer credit are credit card debt and personal loans. With your LendingClub IRA, you’ll be investing in securities called LendingClub Notes, which correspond to portions of personal loans facilitated by LendingClub. The Notes are graded A-E based on the borrower’s credit profile, with A being the least risky and E being the most. Notes come with 3-or 5-year terms, and you receive payments each month as borrowers repay their loans. As an investor in Notes, you can choose the grades (A-E) and terms (3 or 5 years) you’re comfortable with.
Investing at LendingClub—how it works
Make your money work for you through reinvestment
You may be familiar with compound interest within a savings account, or dividend reinvesting when you invest in stocks. Here at LendingClub, we also offer a way to reinvest your returns, as well as your principal. Unlike other securities, such as certain bonds where you may need to wait until maturity to get your principal back, Notes are paid off as borrowers make monthly payments of principal and interest. As these payments accrue in your account, you can reinvest both your principal and interest to potentially keep earning more. To easily reinvest, turn on LendingClub’s automated investment feature within your LendingClub account. With automated investing, every time $25 or more accrues in your account (the minimum Note investment), LendingClub will automatically invest that cash for you in a new Note according to your grade and term settings. The earlier you start investing, the more potential benefit you’ll have since any returns can be reinvested over and over until and into retirement.
An opportunity for growth by reinvesting with LendingClub’s automated investing feature
The graph above compares two hypothetical portfolios investing $10,000 over a 3-year period, in the same Note quantities, terms, and grades. The only difference is Portfolio A didn’t reinvest their principal and interest, and portfolio B did.6
Invest for your future
Whether you’re just starting to save for retirement or looking to diversifiy your holdings, LendingClub Notes could be a viable option for earning competitive returns while you prepare for your next chapter.
2. Source: Go Banking Rates< 3. Source: nirsonline.org
4. Contact your tax professional regarding your personal financial circumstances to determine your eligibility.
5. 3.77% – 8.03% average historical returns for loan grades A through E originated from January 2008 through March 2017. Because the likelihood of a loan charging off increases over time, historical returns include only those loans that were issued 18 months or more before the last day of the most recently completed quarter. The range in returns represents 10th and 90th percentile performance as illustrated here, for the period January 2008 through September 2018. The return is weighted based on platform issuance by grade. Historical Returns are LendingClub’s adjusted net annualized returns (“ANAR”). ANAR is calculated using the formula described here.
6. Hypothetical portfolio performance is based on assuming investment in 36-month term C-grade loans using our loss/pre-pay forecasts to project cash flows and calculate returns. Projected Returns are not a promise of future results and may not accurately reflect actual returns. Actual returns experienced by any individual portfolio may be impacted by, among other things, the size and diversity of the portfolio, the exposure to any single loan, borrower or group of loans or borrowers, as well as macroeconomic conditions. Individual results may vary and projections are subject to change. The information presented is not intended to be investment advice, guidance, or a guarantee of the performance of any loan. Past performance is no guarantee of future results.