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Not Feeling Confident About Retirement? Self-Direction Can Help Boost Your Preparedness.

Published on December 27, 2016

There are multiple factors at play when it comes to Americans’ confidence about their financial readiness for retirement.

Millennials are dealing with college loans and in many cases are trying to establish their careers, home ownership and families. Baby boomers are discovering they have inadequate savings to pay for medical bills and cover living expenses. Here are some factors and concerns about retirement readiness that were revealed in recent research studies.

  1. We are living much longer than prior generations. We all know a centenarian (or two), right? Life expectancies are rising and with them, living expenses for a longer retirement time line. This includes medical costs, which as we all know, have been rising dramatically. The average retiree will need, today, about $130,000 just to cover medical expenses; double that for couples and compare that with what you have in your retirement account.
    1. health-costs1-crop-600x338Fidelity Investments forecasts that women (who live longer) will spend about $135,000 on health care in retirement, while men will spend about $125,000. This represents an 18 percent increase from 2014’s estimate for expenses including Medicare premiums, co-payments, prescriptions, and out-of-pocket costs.
    2. A study by the LIMRA Secure Retirement Institute found that more than half of non-retired Americans believe a significant out-of-pocket health care expense ($15,000 or more) would seriously compromise their financial security in retirement. Given the uncertainties around Medicare and Medicaid, health care requires as much advance financial planning as any other aspect of life.
    3. Many women feel compelled to file for Social Security on the early side due to life circumstances, but then collect a lower amount for their lifetimes. Had they been able to wait until full retirement age or later (age 70), they would collect more.
  1. Social Security is not keeping pace with actual cost of living.social-security
    We’ve said this many times—do not think you can rely on Social Security to cover your living expenses during retirement. It was never meant to be anyone’s sole source of income in later years although it is, for many people. The raise in the cost of living adjustment (COLA) for 2017 will be a measly 0.3 percent which amounts to a few dollars a month on average. All the more reason why building up a self-directed retirement portfolio will be a better safety net for investors who are comfortable making their own investment decisions.
  1. Women are financially fragile. Although more women are working, it turns out that, according to research from the George Washington University Global Financial Literacy Excellence Center, women in their 50s are more financially fragile than they were just a decade ago. They are therefore delaying retirement due to accumulated debt or in many cases, divorce or widowhood and the lack of financial stability due to these circumstances.
    1. We are not living in Ozzie & Harriet times; working women need to save for retirement, whether through a Traditional or Roth IRA or employer-sponsored contribution plan, and create a more financially secure and independent future. Women business owners have SEP IRAs as another possibility. All IRAs can be self-directed, so the account holders can include many different types of alternative assets in these plans, which have the potential to build a more lucrative nest egg.
    2. A recent survey of American workers by the Transamerica Center for Retirement Studies substantiates this problem. It reveals that 46 percent of women are either “not too confident” or “not at all confident” in their ability to retire with a comfortable lifestyle, compared with 36 percent of men; only 12 percent of women are “very confident” in their ability to fully retire with a comfortable lifestyle.
  2. Caregivers lack retirement savings and are in crisis. Full-time caregiving has a severe impact on people’s ability to plan for their own financial futures as well as those of their loves ones. A majority of families (82 percent) with special needs children/young adults report they are concerned they don’t have enough money to last their disabled relative’s entire lifetime. These are families for whom caring for a child with special needs is a full-time job. And, since they have spent enormous amounts of time and money caring for their loved ones with special needs, nearly a third—30 percent—are not saving for their own retirement. These results are from the Special Needs Caregiver Survey from the American College of Financial Services.
    1. It was also revealed that 67 percent of Americans with special needs have no Special Needs Trust established for them, which puts them at imminent risk of losing Medicaid coverage and Social Security benefits.
  1. Half of Americans fear they will outlive their money. A recent survey conducted by Research Now Group Inc. and commissioned by Fifth Third Private Bank found that nearly half of those surveyed have serious concerns about outliving their funds in retirement. Only 25 percent of those surveyed said they feel more optimistic about their financial future than they did last year. Backing up this concern is the latest GOBankingRates survey: in 2015, out of more than 5,000 adults surveyed, 62 percent have less than $1,000 in savings, and 28 percent reported having no savings at all.

Bolstering your retirement accounts through self-directed investing is one way to take control of your financial future. With self-directed retirement plans, you can invest in nontraditional assets you already know and understand such as real estate, precious metals, or commodities. You can even build tax-advantaged retirement savings by making  loans. Next Generation Trust Services, an administrator of these plans, is here to answer any questions you have about self-direction as a retirement strategy, and our handy online tools and educational videos and webinars will help you get started. Contact us at Info@NextGenerationTrust.com or (888) 857-8058 for information and build your retirement confidence—and savings—through a self-directed retirement plan.