Finding Retirement Security Aside from Social Security

Published on August 15, 2017

It seems that with the country’s aging population, enormous baby boomer demographic, and a dwindling Social Security trust fund, the idea of that safety net is becoming more of an idea and less a certainty for future retirees.

The yearly Social Security status report from the fund’s trustees, released in early July, cites 61 million beneficiaries and 171 million covered workers and their families—an increase of more than 32 percent and 14 percent, respectively, over 13 years.

Aside from more people taking benefits, projections show the trust fund for Social Security’s retirement and disability benefits will no longer be fully funded in 2034 (meaning that many people in their early 50s who choose to retire in their mid-to-late 60s will have less to count on in terms of those benefits). The report added that if no solution is found, promised benefits will take about a 25 percent cut, and Medicare’s hospital insurance trust fund is projected to suffer similar cuts in 2029.

Other economic factors that are plaguing many people are:

• Income inequality. Economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman published a paper in December 2016 stating that the average pre-tax income of the bottom half of adults (117 million people) has been stuck at $16,200, adjusted for inflation, for more than three decades. The average pre-tax income of the top 1 percent was $1.3 million as of 2014, more than three times what it was in 1980. The economists cited that the top 1 percent now earns about 20 percent of the national income, while the bottom half earns 12 percent.
• Lack of a workplace savings plans or any type of retirement savings plan. Millions of Americans do not have access to these.
• Many employers are phasing out their defined-benefit pension plans or workplace defined-contribution plans, which of course makes it more imperative that individuals open and start funding an IRA.
• The high cost of health care and of health insurance in our country, and fears about how proposed changes to the Affordable Care Act, Medicare and Medicaid will affect millions of people.
  

What about Social Security?

Americans from all walks of life rely heavily on Social Security for their income in later (and not-so-later) years. According to 2016 U.S. Census data, more than 22 million people would have slipped into poverty without Social Security benefits; that includes 1.1 million children. However, with the average Social Security benefit coming in at $1,360 a month ($16,300 a year) it was never meant to be the sole source of income but rather, a safety net. Plus, a portion of each Social Security check pays Medicare premiums and in many cases, supplemental medical insurance. Unfortunately, estimated retiree healthcare costs are likely to rise at a higher annual rate than Social Security’s cost-of-living adjustment.

It’s no wonder younger workers are becoming disillusioned with the idea of a well-funded, comfortable retirement thanks in part to Social Security benefits. The Equality of Opportunity Project, a research effort that analyzes income mobility, cites figures from a 2016 study titled, “The Fading American Dream: Trends in Absolute Income Mobility Since 1940.” It says that “Over 50 years, children’s prospects of earning more than their parents have fallen from 90 percent to 50 percent.”

• Eighty-one percent of millennials worry that Social Security won’t be there for them when they want to retire, according to a 2016 survey by the Transamerica Center for Retirement Studies.
• Fifty-one percent of the 18- to 29-year-olds who took part in a national poll released by Harvard’s Institute of Politics in late 2016 said they were “fearful” about the future of America.

Get more secure about your future through self-direction

For self-directed investors, the future looks brighter; these savvy investors are making their own investment decisions, based on assets they already know and understand, and they are including alternative assets within their self-directed retirement plans. By taking control of their futures today, they are taking an active role in creating a more diverse retirement portfolio … and taking the burden off of Social Security benefits as the main source of retirement income.

Self-directed retirement plans enable individuals to include a broad array of nontraditional investments that are not usually allowed in typical plans; these include real estate, precious metals, private placements and equity funding, unsecured and secured loans, commodities and much more. Through self-direction, you are able to build a different kind of safety net that you control. Want to know more? Read about self-direction as a retirement wealth-building strategy here or contact Next Generation Trust Company at Info@NextGenerationTrust.com or 888.857.8058 to get started.