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.
Are Americans on Track to go Broke?
Americans Aren’t Breaking the Retirement Bank…
But They Can Get on Track with a Self-Directed IRA
A 2018 Retirement Savings survey by GOBankingRates found that American adults on average are not doing well when it comes to saving for retirement. While this isn’t new, the percentage of Americans with nothing ($0) saved has dropped, and the percentage of those who have at least $300,000 in their retirement plans has increased over the past three years.
The survey targeted three age groups: Millennials, Generation X and Baby Boomers, with about 1,000 respondents per group. They were asked to estimate how much they have saved for retirement and were given assorted ranges to select from (less than $10,000 to $300,000 or more).
The alarming result is that 42 percent of those surveyed have less than $10,000 saved—that’s not even enough to cover one year’s worth of living expenses, which according to the Bureaus of Labor Statistics, is on average, $46,000 a year for adults 65 and up. Included in this group, 14 percent have nothing saved for retirement. Luckily, as noted above, this percentage is dropping.
Summary statistics: The percentage of people who could retire broke, with less than $10,000 saved, has shrunk in recent years as per the GOBankingRates Retirement Savings survey:
2016 – 56 percent
2017 – 55 percent
2018 – 42 percent
Here’s a silver lining: the survey revealed the majority of Americans have more saved for retirement, broken out as follows:
- Nearly 7 percent saved $10,000 to $49,999
- Nearly 13 percent have $50,000 to $99,999
- More than 12 percent have $100,000 to $199,999
- Nearly 10 percent have $200,000 to $299,999
- About 16 percent have $300,000 or more in retirement savings
Among the reasons cited for not saving, about 40 percent said they don’t make enough money to save, and around 25 percent reported they are struggling to pay their bills.
Statistic: 57 percent of Millennials have $10,000 or less saved for retirement
Millennials had the highest percentage of respondents with nothing saved (18 percent). Given they are still in the early stages of their careers, it’s not that surprising. Another 39 percent of Millennials have less than $10,000 saved—but at least they have a longer time horizon to catch up. However, the total percentage among this group that reported nothing, or less than $10,000 saved, dropped significantly from last year and the percentage of this generation with $300,000 or more saved has grown slightly—all encouraging signs for these younger workers.
Baby Boomers, who are now facing retirement, are also facing some challenges in terms of saving for retirement.
Statistic: Although 23 percent of Baby Boomers (55 and over) have saved $300,000 or more, about one-third have less than $10,000 saved
Don’t be a statistic! Start saving for retirement with a self-directed IRA
Whether you’re a younger worker, a mid-career Generation Xer or a Baby Boomer looking to retire now or very soon, there’s time to catch up on your retirement savings. With a self-directed IRA, you could build a more diverse retirement portfolio with alternative assets such as real estate (investment property), commodities (agricultural, energy, livestock), precious metals, private placements, and many more.
You can open and self-direct a Traditional or Roth IRA, a SEP IRA if you are self-employed, or a Solo 401(k). If you are comfortable making your own investment decisions or already know and understand certain non-traditional investments, you can include them in a self-directed IRA. It doesn’t take much to start; you can even roll over or transfer an existing retirement account into a new self-directed plan.
Are you an Active or a Passive Saver?
A Harris Interactive poll conducted online in November 2010 asked 2151 adults about how their savings (if any) are invested now. For their retirement savings, most have parked their money in some combination of stocks/mutual funds, bonds and money market funds; for their personal savings nearly one third (31 per cent) keep their money in bank accounts or CDs. Although individuals will earn negligible interest on those accounts, it seems that for those who struggle to save, “Better safe than sorry” is the guiding factor as they seek the most stable, safest investment vehicles possible.
Concern about market volatility appears to affect the younger age groups as well, even though people in their 20s and 30s have many more years ahead of them to build their retirement wealth, and they are often counseled to be more aggressive early on with their investing.
Harris also reported that a majority of respondents had not changed their portfolio mix in their personal savings and investments or their retirement savings and investments in the six months leading up to the poll (70-74 per cent). A hands-off approach doesn’t serve anyone well except the financial institutions holding those funds. Even the most cautious of investors should sit down with their financial advisers periodically to review their account’s performance, revisit their long-term and short-term financial goals, and make course corrections for how their funds are invested.
What many consumers do not realize is that even for those individuals who have just a few thousand dollars socked away for their retirement, they can boost their yield with some know-how and moxie through a self-directed IRA. Investors who are interested and comfortable in taking a more active role in their retirement strategy should learn more about this growing trend in retirement savings strategy.