Is Your Retirement at Risk?

Published on February 5, 2019

As Baby Boomers continue to retire—and age—and therefore the number of retirees is swelling, especially in the 75+ age group. As their numbers grow, so do the financial risks many of them will face.

According to a report from Center for Retirement Research at Boston College, older retirees (a cohort that will increase in number) will rely on inadequate balances in their 401(k) plans and/or Social Security distributions that won’t do enough to cover their living expenses. Three primary risks were cited in the report:

• Cognitive impairment – The report notes that financial skills deteriorate for many people in their 70s. It can be as minor as forgetting to pay certain bills but escalate to an inability to manage finances or make good financial decisions.
• Medical expenses – Out-of-pocket healthcare expenses will continue to increase. The amount of money many Americans will need to cover out-of-pocket medical expenses and long-term care could be in the hundreds-of- thousands-of-dollars range throughout retirement, especially as people age.
• Widowhood — The lack of dual income from Social Security that widows might have expected in the past will hit some widowed retirees in the wallet. It’s important to understand how benefits are based and be aware of what to expect upon full retirement in order to plan accordingly.

These risks could affect the projected 23 million retirees aged 75 and older in 2020 (and in 2040, approximately 43 million retirees according to projections). These factors become largely important when less income is derived from traditional pensions, relatively skimpy retirement plans, and Social Security (especially as the full retirement age rises).

Mitigate retirement risk with a self-directed IRA

The risks mentioned above can hit anyone at any time during one’s retirement years—which makes it so crucial to plan for retirement with ways to mitigate those risks. Investing as usual might not cut it, given the uncertainties of the stock market, dwindling workplace pension benefits, and other economic factors. However, there is an action you can take now to mitigate possible risk to a comfortable retirement: open a self-directed IRA.

A self-directed IRA is one you control, and can include alternative assets you know and understand. It’s a great way to prepare for the future by investing outside of the stock market. Having recurring income from a rental property, royalties from a Broadway show, or other nontraditional investments allowed in these plans can help you plan ahead and build a more diverse retirement portfolio. You might not be able to control the effects of growing older but today, you can control how your retirement plan will be invested through self-direction.

Use our handy starter kits to get your self-directed IRA open and funded. If you have any questions, email our team at NewAccounts@NextGenerationTrust.com or call 1.888.857.8058. We’re here to help.