COLA is up – and so are Retirement Expenses. A Self-directed IRA Can Help You Keep Pace.

Published on July 24, 2018

The Social Security cost of living adjustment (COLA) for 2019 is predicted to be higher than usual, at more than three percent (it was two percent in 2018); this would increase the average monthly Social Security benefit of $1,300 by about $39. The expected 2019 increase represents the highest COLA since 2012; this estimate is based on consumer price index data through April 2018.

However, in this day and age, that little boost won’t go too far in keeping up with common household expenses. Those expenditures, according to The Senior Citizens League annual survey, are growing much faster than three percent. And for those retirees who rely very heavily or solely on their Social Security benefits for retirement income, the COLA is simply not enough.

The survey, conducted between January and March 2018, reports that in 2017, the cost of home heating oil rose 22 percent for people over 65 and Medigap premiums have increased by 16 percent. In addition, over half (55 percent) of the 1,130 respondents indicated that their household spending rose by more than $79 per month in 2017.

In June, the House Ways and Means Social Security Subcommittee held a hearing on the 2018 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. In announcing that hearing, the 2017 report found that Social Security’s combined trust funds will be exhausted in 2034, at which point beneficiaries would face a 23 percent benefit cut unless Congress acts. This would affect workers who are now in their early 50s and many baby boomers who, in their late 60s or even in their 70s, may find themselves tightening their financial belts in their later years if they have not saved enough for retirement.

The trustees also estimated that the Disability Insurance Trust Fund would be unable to pay full benefits in 2028—just 10 years from now—if no action is taken.

Take action now with a self-directed IRA

For individuals who are being proactive about their retirement savings by funding a retirement plan, the dire predictions about the Social Security Trust Fund are a little less worrisome although still a concern (after all, most workers who have paid into Social Security for decades look forward to the financial boost of their benefits during their retirement). For investors who want to get more creative and diversify their portfolios with alternative assets, they can take action now by opening a self-directed IRA.

To determine if a self-directed IRA could be right for you, ask yourself these questions:

• Do I prefer making my own investment decisions?
• Am I comfortable performing my own due diligence on nontraditional/alternative investments?
• Do I know and understand precious metals, real estate, private equity, commodities or mortgages (to name a few of the investment vehicles allowed through self-direction)?
• Am I already investing in those or other alternative assets outside of my existing retirement plan?

If you answered yes to these, self-direction as a retirement strategy could be right for you. Savvy investors who want to take control of their futures, and be independent of concerns about the health of the Social Security Trust Fund, are investing in a wide array of alternative assets in their self-directed retirement plans—with the same tax advantages of regular retirement plans.

Want to take action? Next Generation is here to help. Check out our latest interview for the basics, use our Starter Kits to open a self-directed IRA, or email us at NewAccounts@NextGenerationTrust.com or call 1.888.857.8058 for assistance.