Can You Retire Without a Pension? A Self-Directed Retirement Plan Could be Your Answer

Published on May 23, 2016

For decades, American corporations had a great system in place: lifelong employment at one or two companies and a retirement supported financially by their employer-funded pension. In these defined benefit plans, the pension payments are calculated according to length of service, and salary earned at the time of retirement. The money used to fund the pensions was historically invested in the stock market and in bonds, earning plenty of interest.

However, in an effort to tighten their corporate bootstraps, companies have moved away from these plans in recent years towards 401(k) plans (retirement savings plans sponsored by an employer, in which workers contribute a portion of their paycheck. In these defined contribution plans, the employee contributions can be either pre-tax or post-tax, and in some cases employers match employee contributions to a certain limit.

The public sector is also struggling to maintain its pension plans, which are partially funded by employee contributions and taxpayer dollars. In Illinois, pension liabilities were underfunded by $111 billion as of December 2015. New Jerseyans will remember the fight Governor Christie had with the teacher’s union to cut the teachers’ pensions as a budget-balancing, cost-cutting measure for the state. Other unions are feeling the pension pinch; thousands of Teamster retirees from across the country rallied at the U.S. Capitol in mid-April 2106 to protest the proposed cuts to their pensions by the Central States, Southeast and Southwest Areas Pension Fund (CSPF).

Why Are Pensions Failing?

Americans have been taught into thinking that their pension was going to provide a stable and comfortable retirement. However, for many workers, that part of the American dream has become a financial nightmare. In fact, many economists estimate pensions to be underfunded by several trillion dollars at this point.

In an article for SchiffGold, Addison Quale analyzed why the pension system is failing. Here are a few reasons:

A Cure for the Pension Plan Blues — Self-Directed Retirement Plans

As recent history and events are showing us, the pension system is collapsing (not to mention, the Social Security Trust Fund, which may not pay benefits to millennial workers when they are ready to retire). However, Americans have options when it comes to saving for retirement. For those who are comfortable making their own investment decisions, and want to take full control of their financial future, a self-directed retirement plan could be a great way to go.

Rather than be beholden to an employer pension that may or may not be there when you retire, why not look into self-direction as a retirement wealth-building strategy? For individuals who know and understand how to invest in nontraditional assets, doing so through their retirement plan is a great way to build up a diverse portfolio beyond stocks, bonds, and mutual funds. And, it frees those investors from the burden of uncertain pension plan benefits.

Any kind of retirement plan can be self-directed: Traditional or Roth IRA, SIMPLE IRA, SEP IRA and, if your employer offers the option, a 401(k) plan (ask your employee plan administrator). Investors can include real estate, precious metals, commodities, unsecured loans, hedge funds and many more alternative assets within these plans.

At Next Generation Trust Services, we’re here to help. Our Starter Kits have everything you need to open an account and our educational videos walk you through the steps of many types of transactions. If you have any questions about self-directed investments or need help getting started, contact our helpful professionals at 888.857.8058 or


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