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Can You Still Really Bank on Your 401(k) Plan?

Can You Still Really Bank on Your 401(k) Plan?

According to a recent report from investment advisory firm Research Affiliates, not so much.
The report states that even making a 5 percent return on traditional investments in a 401(k) plan is not likely to happen over a 10-year horizon.

Research Affiliates looked at the default settings of 11 retirement calculators, robo-advisers, and surveys of institutional investors and came out with an average annualized long-term expected return of 6.2 percent. Taking 1.6 percent off for inflation, the number dropped to 4.6 percent (rounded up to 5 percent). The research considered plans containing mainstream stock and bond portfolios (60% stocks and 40% bonds) in target-date funds with 10 years to retirement. And you know what that means: either work longer to save more or get more aggressive with your retirement portfolio through self-direction.

Go ahead, be a retirement savings maverick and take control of your future with self-directed investments.

If you’re savvy about certain investments such as precious metals, commodities, real estate, and private placements, and you’d like to include these in your retirement plan, you can do so with a self-directed retirement plan at Next Generation Trust Services. After all, if you are already making these types of nontraditional investments outside of your existing IRA, why not make them part of a self-directed IRA that you control?

With self-direction, the account holder makes all his/her own investment decisions and can include a vast array of alternative assets not allowed in typical retirement plans. And, depending on your employer’s guidelines, you might be able to self-direct the 401(k) plan offered at work. Either way, you can read up on what self-direction is all about on our website, download our free white paper, or contact our helpful team with any questions you have about building up your self-directed retirement savings. Then, head on over to our Starter Kits to open a potentially more lucrative retirement portfolio with a self-directed IRA at Next Generation Trust Services.



Why Millennials are Borrowing from their 401(k) Plans – and Why it’s a Bad Idea

It’s tempting to use those funds in a 401(k) plan to put a down payment on a home or to consider it as your children’s college account. It seems that a number of millennial workers are inclined to do this, according to an article in Investment News.

The author cites a Scarborough Capital Management survey that found that 12 percent of people ages 18 to 34 with 401(k) accounts have pulled money out of them to buy their first home. Of the slightly older millennials and younger Gen Xers (ages 35 to 44), nearly eight percent have done so. Older adults “borrow” from these plans at a lower percentage.

Another reason cited by millennials for using retirement funds: paying for their children’s college. In fact, almost half of the survey respondents said they were considering using 401(k) assets to pay for this expense. The 35-44 year-old-group was at 26 percent.

It seems younger savers might not understand all the ramifications of doing this, such as the fact that the borrowed funds tend not to be replenished or paid back; therefore, account holders lose the potential investment gains their funds could earn over time. Plus, there are limits to how much you can borrow and rules about paying it back, so if taking a loan from a 401(k) is calling your name, you are best served to call your trusted adviser to discuss this first.

Rather than resort to this tactic, which could cost a lot of money over time (in terms of those taxes, penalties, and lost investment returns), why not borrow funds from someone you know who has a self-directed retirement account?

Unsecured loans are one of the many nontraditional investments that self-directed investors can make. These include loans for tuition. The account holder and borrower set up all the terms of the loan, from interest rate to time period; then, the account holder sends the instructions regarding disbursement of funds to the self-directed retirement plan administrator along with the note that was created, who executes the transaction (among other important administrative responsibilities).

As with any self-directed retirement transaction, all income and expenses related to the asset—in this case, the loan—must flow through the IRA. This is not a personal loan between two people; it is a loan between a self-directed IRA and an individual. The retirement account earns interest on the loan, the friend or colleague is able to make the purchase or payment he/she desires, and everyone wins.

In order to protect the self-directed retirement plan’s tax-advantaged status, it’s important that the account holder not make a prohibited transaction to a disqualified person, so always check with your plan administrator before making these arrangements.

If your account is held at Next Generation Trust Services, be sure to contact our helpful professionals for insights into this type of transaction, at or 888.857.8058. We will also conduct a comprehensive transaction review to ensure you are conducting a transaction that complies with IRS guidelines.


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Retirement on a Budget

Many millennials feel the pressure of student loans bearing down upon them and it can be terrifying trying to figure out how to get rid of all of that debt. On top of worrying about your current financials, you have everyone under the sun telling you to plan for your retirement. You’re probably thinking, “With WHAT money!? How can I get out of debt while saving for retirement at the same time?”. It can seem overwhelming. That’s where Self-Directed IRAs can come in handy for you.

The Basics: Traditional and Roth IRAs

An IRA is an Individual Retirement Account. These accounts are provided by an assortment of financial institutions and they are tax advantaged. There are a few different types, but for now we’ll stick with the basic two: Traditional IRAs and Roth IRAs. Traditional IRAs are tax deferred accounts. What this means is that in addition to the tax deduction you receive for contributing to your IRA, your earnings within the IRA (interest and gains) are also deferred until you distribute. When you withdraw money from your IRA, it is taxed as ordinary income. Roth IRAs are a bit different. There are contribution limits for Roth IRAs and the contributions you make are not deductible. The big draw for a Roth IRA is if you meet certain requirements when you take money out, it is tax free.

The Beauty of Self-Directing

With an IRA you can invest in things like stocks and bonds. With a self-directed IRA, your options become a little broader. Are you well versed in real estate? You can invest in that. Do you like the security of precious metal investments? Invest away! Maybe you’d like to invest in a business? No problem!  With self-direction you can pick something that you are familiar with and invest to your hearts content.  When you self-direct, you are in the driver’s seat. You can invest in ways that other IRAs and 401ks can’t.

Having a wider array of investment options isn’t the only bonus of self-directing your IRA. It may seem like you need a lot of money to start investing. The truth is you can start with whatever you feel comfortable with. Once you begin investing, you’ll gain the experience you’ll need to feel more comfortable with your decisions and invest more. Investing your money can seem scary at first. You can go your own pace and stick with what you feel most comfortable with.

If you would like to learn more about self-direction, contact us here at Next Generation Trust Services. We would be more than happy to answer any questions you might have. You can reach us at or 888.857.8058.

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The Death of the Pension Fund

The Urgent Need for a New Retirement Strategy (Hint: It’s Self-Directed)

Screenshot (2) Many economists acknowledge and write about the problem of Americans’ lack of preparation for retirement. We don’t save enough—many have virtually nothing set aside for their post-employment years.

One issue that has contributed to this, according to Wall Street executive Steve Rattner, is that pension plans—the defined benefit plans that were so popular at one time as a perquisite—are disappearing. Just as the Social Security Trust Fund is becoming unsustainable, and not a given for retirees in the foreseeable future, pension funds have also become unsustainable for employers faced with mounting costs and increased regulatory burdens. Taking their place were defined contribution plans such as 401(k)s.

Screenshot (3)The problem is, Rattner reports that only about 10 percent of participants in these plans actually contribute the maximum amount allowable … so those folks are falling behind on their retirement savings. The move to defined contribution plans has placed a bit of a burden on participants, who must become more knowledgeable about their investment options (typically stocks, bonds, and mutual funds). Depending on the plan offered by the employer, account holders are expected to allocate their assets, evaluate mutual funds, and select individual stocks.

Of course, we all know how things go when people rely strictly on the stock market—just look at the history of stock averages over the past 15 years! (Buckle up kids, it’s a bumpy ride.)  Rattner cites these statistics: “In the first quarter of 2016, domestic mutual funds—a favorite investment vehicle for these retirement accounts despite their chronic underperformance—had their poorest showing in nearly two decades. Through June 15, the 20 most popular funds for 401(k) assets were up 0.6 percent so far in 2016, compared with 2.4 percent for the Standard & Poor’s index.”

The author goes on to talk about revamping the 401(k)s but at Next Generation Trust Services, we have a better idea: open a self-directed retirement plan and take control of your future.

Self-Directed-IRA-Arizona-Real-Estate-InvestingNow, we know that self-direction is not for everyone—but it is a great strategy for savvy investors who really understand the many investment options available on the market, from the traditional to the broad array of alternative assets these plans allow. Sick of the stock market roller coaster? Consider including commodities in your self-directed retirement plan. Don’t like how T-bills are performing these days? What about including real estate in your self-directed IRA? The possibilities are numerous.

If you are already investing in alternative assets outside of your existing retirement plan, you could be building tax-advantaged retirement wealth through self-direction, with nontraditional investments that aren’t allowed in typical plans. If you are someone comfortable doing the research required to make these investments wisely, and are comfortable making your own investment decisions, we say “go for it!”

So, rather than relying on those stock-based or mutual-fund-dependent 401(k) plans from an employer, find out more about self-directed retirement plans—perhaps you can even self-direct your employer-based plan. It’s worth asking.

At Next Generation Trust Services, we’re committed to helping more people self-direct their retirement plans by providing information and education about how self-direction works,  as well as what you may include (and what you may not). Our team of professionals is available to answer your questions or help you get started; you can contact us at or 888.857.8058. If you’re a true self-starter, go to our Starter Kits to get your self-directed retirement account open.

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Rolling Over those 401(k) Funds into an IRA? Make it a Self-Directed IRA.

An article in Investment News in mid-March talked about baby boomers pondering what to do with their retirement savings in their former employer’s 401(k) plan. According to the author, Mary Beth Franklin, “the majority of boomers who work with financial advisers choose … to move their money to an IRA in an attempt to improve their investment performance and consolidate their assets.” This is according to a survey by the Center for Retirement Income at The American College of Financial Services.*

Do you have substantial assets that have been taking a hit with the volatile market this year? Are those assets in a defined contribution plan? If you’re thinking of moving those funds into an IRA, why not make it a self-directed IRA and take control over your investments with what you already know and understand?
The study revealed that more than two-thirds of the respondents kept the money in the employer plan because they liked the investment options; half of this group opted for the path of least resistance because it was just easier.

piggyIf you are someone who likes a lot of investment options, you might be selling yourself short by keeping the funds in a traditional 401(k). With a self-directed retirement plan (which could be a Traditional or Roth IRA or, if the employer allows, a defined contribution plan) you have a much wider pool of investment types to pick from—including many alternative assets you might already be investing in outside of your existing plan. Your financial planner can work with you to develop your self-directed portfolio at Next Generation Trust Services; and, if this professional is an independent, fee-based advisor, he/she can also earn fees on any assets we hold, as long as they are still advising you on those funds or assets.

How about including these investment options in your retirement portfolio?

If you are comfortable making your own investment decisions (or are working with your financial planner to help frame your retirement income strategies), a self-directed retirement plan could be a great way for you to develop a more eclectic portfolio and a more sustainable retirement income stream.

Next Generation Trust Services is a full-service administrator of these plans, and handles all the paperwork and reporting required, executes the transactions, and holds the assets. Your trusted advisor can provide the guidance you seek to build your portfolio to meet your retirement goals, while Next Generation provides the client education and account management.

Have a question about rolling over your 401(k) funds into a self-directed retirement plan? You can watch our informative video about transfers and rollovers here, or contact our helpful professionals at or (888) 857-8058. The more you learn, the more you’ll want to start controlling your future, today!

*The study was based on online interviews conducted last October with 1,002 Americans age 60 or older who had retired from full-time employment within the past three years, and who had at least $75,000 invested in their former employer’s 401(k) or 403(b) plan.

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Retirement Savings: What’s Hot, What’s Not

Americans are saving for retirement in a new way. They have thrown out the traditional three-legged stool (Social Security, employer-sponsored pension plans, and private savings) and replaced it with a pyramid.

According to the Investment Company Institute, the five basic components of the retirement pyramid are: Social Security, home ownership, employer-sponsored retirement plans (both private-sector employer and government employer plans, as well as defined-benefit and defined-contribution plans), IRAs, and other assets.

But, the reality, as reported by the Boston College Center for Retirement Research, is that it is a shaky pyramid. In fact, working-age households are not saving enough to maintain their current standard of living when they retire. With Social Security, Medicare, and underfunded federal and municipal pensions representing the biggest risks for future retirees, Americans need to plan ahead so they won’t get left behind.

Being prepared to supplement Social Security with a robust retirement savings plan is key. In fact, workers should anticipate getting between one-quarter to one-half of their retirement income from retirement savings plans, such as 401(k)s. However, in order to generate this level of income, the typical household must save about 15 percent of earnings—which is well above today’s actual saving rates.

What’s Hot?

What’s trending in retirement savings? According to a recent Fidelity Investments report, retirement savings trends include:

Are you up to date on the latest retirement investment tools? Or, are you like many people faced with the thought of retirement—unprepared?

What’s Not Hot?

Being unprepared is not hot. Retirement should be a time in your life where you can relax and enjoy the fruits of your hard work. But, unfortunately, many retirees are not financially ready to retire.

TIAA-Cref’s Ready-to-Retire Survey  asked retirees what they wished they had done to better prepare for their retirement. Here’s what they reported:

A self-directed retirement account should be on everyone’s wish list as a great way to boost retirement savings through alternative assets. Savvy investors who already know and understand nontraditional investments can develop a more diversified, tax-advantaged portfolio than in regular IRAs or 401(k) plans. Self-directing retirement investments allows for a broader array of assets.

For more information about self-direction as a retirement strategy, or to open a new self-directed IRA, contact Next Generation at (888) 857-8058 or, or click here to read through our Starter Kits.