Impact Investing: Using Your Retirement Dollars to Create and Affect Change

Many of today’s investors desire to invest in asset classes that not only generate financial return but also have a direct and measurable environmental or social impact.


Impact investing is a growing trend as socially conscious investors seek ways to positively impact global issues such as climate change, hunger, poverty and other environmental and socio-economic issues. Impact investments are made to companies, funds and organizations in both developed and emerging markets. The rate of return for impact investing varies — sometimes it’s even less than market rate, but that’s often a side aspect of the investment. For impact investors, the key point is where they put their investment dollars, not how much return it generates.

Impact investors can use a Self-Directed Solo401(k) or Self-Directed IRA provided by Rocket Dollar to make impact investments and still enjoy the significant tax advantages provided by these types of accounts. Indeed, the tax savings serves as a boost to the investment return generated by the investment.

Impact Investing 101

Impact investors seek to affect change by providing capital in certain key sectors, such as:

Renewable energy and clean technology
Sustainable agriculture and agricultural productivity
Affordable housing, sustainable infrastructure and transportation
Conservation, education and healthcare
Water, sanitation and hygiene
Small businesses and micro-enterprises
Other common avenues of impact investing include investing in a B Corp that has a specific social or environmental mission, social impact bonds, or for-profit companies that have social missions.

The goal of the investment is to initiate positive social or environmental change through the investment. It’s a trend that’s turning the tables on deep-rooted beliefs that socially or environmentally conscious investments should be made exclusively by non-profits or philanthropic organizations — and that financial investments should be solely focused on financial gain.

Impact investors are a diverse group, ranging from socially conscious individuals to institutional and family foundations, religious institutions, family offices and pension funds. Angel investment groups also are entering the impact investing space as well — in Rocket Dollar’s hometown of Austin, Texas, the Southwest Angel Network supports early-stage for-profit companies that are addressing significant societal challenges.

Millennials and Values-Based Investing

Impact investing also is proving to be an especially important investment channel for socially and environmentally conscious Millennials. This cohort thinks about wealth differently than past generations, and for them, the impact their money has and the legacy it leaves is often just as important as the wealth itself. Environmental stewardship and resource conservation go hand-in-hand with the creation of new wealth through investing.

Millennials have grown up in the world that’s markedly different than previous generations, and as a result they view the world differently. They care deeply about how their money is spent and support causes that can help the environment or make a dent in issues in which they believe. It is values-based investing.

Rocket Dollar makes it easy for Millennials and others with money tied up in company-sponsored individual retirement accounts to use those funds for impact investing.

Impact Investing Through Rocket Dollar

Most retirement accounts do not allow account holders to make impact investments — investment options typically are limited to company-chosen mutual funds, stocks and bonds. Or in the case of an IRA, the options the IRA provider provides. Rocket Dollar’s Self-Directed Solo 401(k) and Self-Directed IRA provides a means for account holders to use their retirement dollars to make impact investments and investments in many other diverse asset classes.

Virtually anyone with an existing IRA qualifies for a Rocket Dollar Self-Directed IRA, and the investor can begin putting their retirement dollars at work for environmental or social causes that are important to them. Impact investors make investments straight from their Rocket Dollar accounts and enjoy tax-shielded gains.

Another impact investing opportunity is for investors above the age of 70–½, who can make a qualified charitable distribution from their IRA to a charity of their choosing.

Rocket Dollar simplified the means of creating self-directed retirement accounts so investors and individuals can put their retirement dollars to work in social and environmental causes that are important to them. You don’t have to be an institutional investor, philanthropist or multi millionaire with a family office; anyone can enter the realm of impact investing.

Written by: Chris Palmisano, COO/CRO of Rocket Dollar, Inc.