Get a RISE Out of Your Retirement Savings
You’ve been contributing to your IRA or employer-sponsored retirement plan—but are you retirement-ready or on track to be? Many Americans are not saving enough, or quickly enough, to sail smoothly into a comfortable retirement. Moreover, they are not properly calculating their anticipated expenses during their later years.
The Retirement Income Security Evaluation (RISE) is an online tool that evaluates where individuals are along their path to retirement in terms of their savings and their necessary income needed for the future. Based on data you provide, RISE gives you a score that measures how well you’ll be able to live on what you have saved today. The tool was developed by a provider of actuarial products and services and is provided by the Alliance for Lifetime Income, a non-profit organization. It’s flexible, so users can adjust data to see how they’d fare based on different financial information.
Consumers are asked to input their expected Social Security income, pension income if relevant, current savings, and their monthly living and medical expenses. The tool then calculates a score that tells users how well they can expect to live based on today’s numbers. Many people may be surprised by the gap their score reveals, since health care expenses are often left out of the equation—and can run into the thousands annually in a person’s later years. Plus, depending on the source, financial institutions recommend having up to 10 times your pre-retirement annual income in your retirement plans as a savings benchmark.
Knowing your score and where you stand can help you gauge whether you may need to ramp up your savings or—in the case of self-directed investors—further diversify your retirement portfolio with alternative assets.
Self-direction empowers individuals to achieve their retirement goals in more unique ways, by including nontraditional investments in their plans. These investments—such as real estate, private equity, unsecured or secured loans, precious metals, and more—have the potential to return greater ROI than the stock market and provide a hedge against market volatility. Savvy investors who are comfortable making their own investment decisions can invest in what they already know and understand, and take advantage of certain market opportunities.
If you’re thinking about how to boost your retirement score through self-direction, you can learn more about this strategy in one of Next Generation’s complimentary educational sessions. Or, you can contact our team with any questions about self-directed IRAs and the many types of nontraditional investments these plans allow. We’re available via phone at 1-888-857-8058 or email: NewAccounts@NextGenerationTrust.com.
Next Generation Trust Company (“NGTC”) does not review the merits or legitimacy of any investment. NGTC does not endorse or recommend any companies, products, services or investments. NGTC does not provide any financial, legal or investment advice.
If the services of NGTC were recommended by any third party, such persons or entities are not in any way affiliated with NGTC. All information provided is for educational purposes only. All parties are encouraged to consult with their professional advisors prior to making any investments.
Next Generation Services (NGS) is a third-party administrator of self-directed retirement plans, located in Roseland, New Jersey. NGS handles all the back office administration, record keeping, mandatory reporting, and transaction support. Accounts are named with Next Generation Trust Company as the custodian and holder of assets, for benefit of the individual account.
NGS does not review the merits or legitimacy of any investment. NGS does not endorse or recommend any companies, products, services or investments. NGS does not provide any financial, legal or investment advice.
If the services of NGS were recommended by any third party, such persons or entities are not in any way affiliated with NGS. Next Generation Services is not a “fiduciary” as defined in the IRC, ERISA, and/or any applicable federal, state or local laws. All information provided is for educational purposes only. All parties are encouraged to consult with their professional advisors prior to making any investments.
Raising the RMD, Repaying Student Loans and Other Potential Changes to Retirement Accounts
Helping Americans save more for retirement is very much on the mind of Congress.
In the spring, Senators Ben Cardin of Maryland and Rob Portman of Ohio reintroduced legislation (Retirement Security and Savings Act of 2019) that proposes raising the required minimum distribution (RMD) age for retirement accounts to 75, with increases to be phased in over several years from age 70½. Additionally, it would potentially increase savings in 401(k)s and IRAs, help with small employer coverage for part-time workers, and remove obstacles for including lifetime income options in retirement plans.
NOTE: Currently, account holders of Traditional IRAs and SEP IRAs must start taking required minimum distributions no later than 70-1/2 but this rule does not apply to Roth IRAs, Coverdell ESAs and some other plans.
A different bill, Retirement Parity for Student Loans Act, contains a provision that would enable workers to make student loan payments while their employers make matching contributions into their retirement account “as if the student loan payments were salary contributions.” These elements give Americans more time and more financial freedom to save for retirement.
The House of Representatives has also been looking at retirement legislation; in late May, the House passed the SECURE Act—Setting Every Community Up for Retirement Enhancement, which currently awaits passage in the Senate. The bill’s significant retirement policy changes are designed to improve access to financial products in order to encourage more Americans to save for retirement. It also contains incentives for employers to expand access to 401(k) plans, particularly to employees of small businesses and part-time employees.
Is a self-directed IRA on your mind?
Here are some reasons why it should be:
- The flexibility to take RMDs from one’s retirement plan at a later age can help account holders continue to grow their retirement savings for a longer period of time if they wish—and for those investors with self-directed IRAs, to continue building more diverse portfolios for a longer time horizon.
- Self-directed investors who are including alternative assets within their plans would have the potential to accrue more retirement income from real estate, precious metals, commodities, private equity, and many more nontraditional investments these plans allow.
- Two of the nontraditional investments allowed in a self-directed account are secured and unsecured loans. This means the plan can make loans to qualified individuals for tuition or other education-related expenses. Terms of that loan are worked out between the two parties, with all income flowing back into the tax-advantaged self-directed retirement plan.
- Individuals can also self-direct a Coverdell ESA, which—as noted above—does not carry with it the mandatory RMDs by age 70-1/2. Coverdell ESAs can be set up to pay for education-related expenses, as we explored in a prior post.
If you’re thinking about opening a self-directed IRA of any kind, please register for a complimentary educational session with one of our knowledgeable representatives. Alternatively, you can call our team directly at 888.857.8058 or email NewAccounts@NextGenerationTrust.com with any questions.
Are Your Grown Kids Affecting Your Retirement Future?
We’ve all heard about boomerang children who come back to the nest after college—not yet financially independent, and sometimes staying for longer than parents expect. A financial security survey from Bankrate in early April shows that in many cases, those kids are costing parents their retirement savings. Data reveals a trend of financial co-dependence between parents and children—whether through prolonged education, helping with housing costs, or other high expenses.
All this “help” is hurting Generation X and Baby Boomer parents who should be funneling funds into their own retirement accounts instead. According to the survey, 50 percent of respondents in those generational age groups say they have sacrificed or are sacrificing their own retirement savings in order to help their adult children with finances.
What’s the right age to cover one’s bills?
Survey respondents comprised the Silent Generation down to Gen Z. Most felt that 18 or 19 year-olds (and in some cases, 20 year-olds) should take on their own car payments and auto insurance, cell phone bills, and credit card bills. All generations agreed the average age to start paying for one’s own subscription services is 20 years-old.
The higher the bills, the older the age for when individuals should begin paying on their own, such as age 23 for health insurance premiums as well as student loans. Housing costs (rent or mortgage) also had a higher average age overall, at 21 years old.
Time to pay less and save more
As noted above, the April Bankrate survey found that half of Americans are putting their own retirement savings at risk by covering their grown childrens’ expenses; and a March 2019 survey found that more than 20 percent of working Americans aren’t saving any money for retirement, emergencies, or other financial goals. Major barriers to saving included insufficient wage growth and large debt payments. For those covering grown kids’ expenses, the rising cost of a college and post-graduate education (often felt necessary to be more prepared to enter the workforce) is significant here.
But is it worth sacrificing one’s financial future to provide a financial safety net for children who could be working, at least part time—especially as one approaches retirement?
While each family has a personal perspective on this growing trend, no one can dispute the importance of preparing for a comfortable retirement. One way to combat the “boomerang child” syndrome is to self-direct one’s retirement account, and grow tax-advantaged income through investments in alternative assets such as real estate, commodities, precious metals, private equity, unsecured and secured loans, and more.
Take control of your retirement with a self-directed IRA
Self-directed investors not only know and understand certain nontraditional investments, they are comfortable making their own investment decisions. A powerful decision to make is to start controlling your retirement savings through a self-directed IRA.
Even putting a little money into a self-directed IRA every month as you wean your kids off your wallet will enable you to build a more diverse retirement portfolio. Set the example and who knows? Maybe when junior is ready to be on her own, she’ll open a self-directed retirement plan too and start investing in land or energy, a Broadway show, a startup company, or any of the creative ways to boost retirement wealth through self-direction.
Next Generation makes it easier for you and your adult kids to get started. Our helpful team can answer your questions about self-direction in general or your account in particular. And our newsletter subscription is always available so you can learn more.
Contact Next Generation at NewAccounts@NextGenerationTrust.com or 1.888.857.8058 for assistance. We can’t help you get your kids out of the house but we can help you take more control over your investment returns through self-direction.
Alternatively, you can register for a complimentary educational session with one of our representatives.
Baby Boomers Beware – Retirement Approaches: Are You Financially Prepared?
According to a study by the Insured Retirement Institute in April (Boomer Expectations for Retirement 2018), 42 percent of baby boomers have nothing saved for retirement.
Even the very youngest of this cohort, who are about a decade from retirement age, do not have enough savings for retirement. And, among baby boomers who do have retirement savings, 38 percent have less than $100,000 saved for retirement. As we have highlighted in other articles, this is not nearly enough to cover living expenses throughout a long retirement horizon… especially when you factor in health care costs.
The study also revealed that among baby boomers:
- Only 38 percent have calculated the amount they will need to retire
- Forty-six percent of boomers expect they will need $45,000 (in current dollars) or more in annual retirement income.
- Assuming the current average Social Security benefit of $16,848 annually, an individual would need to generate at least $28,152 in additional annual income from a combination of pension benefits and retirement savings to meet that figure.
- Only 25 percent believe that they will have enough money in retirement
- And only 28 percent believe they are doing (or did) a good job financially preparing for retirement
Given these statistics, it’s no surprise that 29 percent of those surveyed expect to work past age 70. With the “gig economy” on the rise and a lack of employer-sponsored retirement plans, the problem is likely to grow unless workers open a retirement plan and contribute on a regular and disciplined basis.
Create a retirement savings boom through self-direction
For baby boomers who are comfortable making their own investment decisions, especially those on the younger end of the boomer generation, they could close that savings gap with a self-directed retirement plan. By building a more diversified retirement portfolio through nontraditional investments, and by taking advantage of the catch-up contributions for investors ages 55 and older, financially savvy baby boomers can take control of their future now.
If you are a younger member of the baby boomer generation and are already investing in alternative assets outside of your existing retirement plan, opening a self-directed IRA could be a great way to grow your retirement nest egg. Next Generation Trust Company has all the information and forms you need to get started, and our helpful professionals can answer your questions about self-directed IRAs and the types of investments these plans allow. Plus, they’re always here to guide you along the way. Contact Next Generation at Info@NexGenerationTrust.com or 1-888-857-8058 to find out more about putting some boom into your retirement plan today!
Generation Y’s Guide to Saving for Retirement
Generation Y (The Millenials), by broad definition, is comprised of those born in the 80s through early 2000s—and the very thought of retirement plan savings at our age can be daunting. Right off the bat, the same fears are dug up, time and time again; fear of money loss, fear of misdirection, pushing away tomorrow’s retirement in lieu of today’s excitement.
We’re a part of a generation that challenges the status quo and asks questions. We’re part of a generation that demands equality regardless of tenure. We’re also part of a generation that watched the economy drop out from beneath us. We’re a generation that cannot afford to ignore retirement planning.
So how can we move forward, and still balance fun spending with saving for our golden years? These easy tips will get you started on the road to investment.
A Little Goes a Long Way There are no rules that say you have to move a huge amount monthly, or per paycheck into savings. You can automate your payments per check—even if it’s just $25 per paycheck. Whatever you can manage is better than nothing. As for Next Generation Trust Services’ part, we expect to have incoming direct deposits functional during our first quarter, so that you can make your contributions with relative ease.
Pay Yourself First It’s easy to find yourself without any savings if you make it the last priority. It’s amazing what you can learn to do without (or not even notice is missing) if you put savings away first, instead of trying to put “extra” into savings.
Bank Your Bonuses Any extra earnings that flow your way, whether it’s a company bonus, a few bucks from a scratch-off, your tax refund or some unexpected birthday money—bank it. Even if you can’t put away all of it, put away half; you weren’t counting on it, so you won’t miss it.
Open a Roth IRA Tax free earnings is not just a buzzword, it’s a money saver, and the income limitation is over $100,000, so most people are eligible. Not to mention, that anything that you put in (out of pocket contributions) you can take back out without penalty or tax. Whereas it’s preferable to keep it in the plan where it makes tax free money, it’s truly an emergency fund.
Budget, Budget, Budget—Reward Plain and simple, if you want to save money, you have to spend less than you earn and there is no way to know that if you don’t track. Writing out a budget can seem like a major downer as you watch where your money actually goes, but by setting yourself budgeting goals, you can control your spending and reward yourself for a job well done. For example: Your weekly grocery budget is $80. If you come in under $70, you get a $5 splurge from the bakery. Total cost is still below budget; you save at least $5 and treat yourself at the same time. Win-win.
Take Advantage of Social Media Use Twitter, Facebook and LinkedIn to follow and like professionals that have done it all before. People are chock full of information for you; use the internet as the learning tool to get a grip on learning how to invest and find reliable information. You can follow @NextGenTrust on Twitter for tips and updates. OnlineSchools.com has a list of 100 Best Twitter Feeds for your Financial Intelligence, and there are plenty more resources for you out there.
These are just a few tips for the Boomer’s Babies on getting started in the financial world that seems to be filled with pitfalls and snags and mountains to climb—but what is life without a sense of adventure?
Fewer Americans Confident About Retirement Savings, Survey Finds
The New York Times released an article reflecting a recent survey about retirement savings a few weeks ago. As per this survey, the drooping economy is causing concern amongst Americans as to whether or not they will be financially capable to retire timely. According to this survey and the “Unretirement Index” only a quarter of Americans are “very confident” that they will be able to retire.
Are you confident in your retirement savings? Do you forsee yourself being able to retire on time? What are you doing to supplement your retirement savings?