Will Social Security Benefits Support Your Retirement Age?

Although individuals can claim Social Security benefits as early as age 62, the retirement age associated with full Social Security benefits had been 65 for many years. That marker has been creeping up over time, with the number currently set at age 67 for people born in 1960 or later. The goal has been to encourage Americans to retire later; the Social Security Trust Fund is only solvent through 2037 and delaying benefits will help shore up the fund.

However, according to a paper titled, “How Sticky is Retirement Behavior in the U.S.? Responses to Changes in the Full Retirement Age,” the increase in full retirement age is not stopping many Americans from retiring and claiming Social Security at the age of 65. The study, published by the National Bureaus of Economic Research (and reported in Investment News) posits that Congress needs to develop new policies – in addition to increasing full retirement age –  to get Americans to retire later.

Adding to this conundrum is the effect that the COVID-19 pandemic has had on the economy and personal finances, with historic levels of unemployment or reduced work. It’s unclear right now how this will play out, but one writer foresees trouble ahead for people born in 1960—who are turning 60 years old this year—because of how Social Security benefits are calculated.

• Each year’s earnings over one’s lifetime are adjusted to index to the growth or inflation of national average earnings; the indexing occurs for the year someone turns age 60 and ends there.
• 2020 earnings are taking a major hit compared to 2019 due to the pandemic, and there will likely be a decrease in the national average earnings this year.
• This in turn reduces the indexed lifetime earnings of everyone turning 60 this year, which reduces the monthly Social Security retirement benefits.
• The author warns that, although unknown right now, average earnings could decline for another year or so, also reducing the benefits of those born after 1960.
• Those who are already retired may see little or no cost of living adjustment (COLA).

This may cause many Americans to re-evaluate their retirement timeline, as they may need to work longer as a financial necessity. This is especially true for those who have not been contributing to a retirement plan.

Build a more supportive portfolio with a self-directed IRA

Many people already understand that Social Security may not be there for them throughout their retirement years or be sufficient to rely on as a sole source of retirement income. As a result, most have retirement plans to support them in their later years. For those who’ve been planning for retirement with a self-directed IRA as part of their portfolio, they understand the need to take control of their retirement planning and diversify their investment allocations.

Self-direction enables investors to include a broad array of non-publicly traded, alternative assets within their IRAs, which provide a hedge against stock market volatility while building retirement wealth. It’s a proactive approach for individuals who are comfortable making their own investment decisions, and who understand nontraditional investments such as real estate, private equity, precious metals, lending, partnerships and  more.

Are you looking to shift your retirement strategy to include alternative assets you already know and understand? Do you want to develop a retirement portfolio that reflects your interests or an area of expertise? If you’re comfortable making your own investment decisions, it’s a great time to plan your retirement from a different perspective. You’ll find a plethora of information about self-directed IRAs on our website. If you have questions about how to get started, you can schedule a complimentary educational session with someone from our team.  Alternatively, you can contact us directly via phone at 888.857.8058 or email at NewAccounts@NextGenerationTrust.com.

Americans are Working Longer

Recent research from the Transamerica Center for Retirement Studies* shows that Americans are working longer, with 54 percent saying they expect to work past age 65 or never retire at all. Twenty-two percent of respondents said they plan to retire either at age 65 or later, and 22 percent plan to retire earlier.

While there are personal factors around why Americans are working longer – such as maintaining social connections, longer lifespan and emotional health – financial factors are also part of this story. In the U.S., it’s often not having enough saved for retirement and Social Security concerns; three-quarters of the workers surveyed said they are worried that Social Security will not be available when they retire.

Global expectations around retirement age are very interesting to look at and compare with U.S. figures. Transamerica conducted additional research across 15 countries, in collaboration with the Aegon Center for Longevity and Retirement. While the current expected age of retirement in the U.S. is 66 (shared by the United Kingdom and Australia), it is 65 in many European countries and Canada, 60 in India, and 58 in Turkey and China. The findings are based on 14,400 workers and 1,600 retired people surveyed online between 22 January and 14 February 2019.

However, as we know, the average retirement age is rising in the U.S.; for Americans born in 1960 and later, it is 67. The Netherlands is already there and according to the study, France, Spain and Poland are planning to move their retirement age to 67 as well.

Americans are Working Longer, but a Self-Directed IRA Can Help Make the Most of Your Employment and Retirement Timelines

In the Transamerica/Aegon global study, a majority of respondents said they envision an active retirement, where work and leisure can co-exist. Sixty percent cited travel and 57 percent cited spending time with family and friends as important retirement goals; 49 percent said they look forward to pursuing new hobbies. Additionally, 27 percent aspired to do volunteer work and 26 percent planned to include some form of paid work. The two biggest retirement concerns were declining physical health and running out of money.

Whether you retire at age 65 or 66, or continue to work in some capacity well into your retirement years, you can make the most of your retirement savings through self-direction. A self-directed IRA allows you to include many alternative assets, which are not allowed in typical retirement plans, and build a more diverse retirement portfolio. This also allows investors to hedge against the volatility of the stock market, and include nontraditional investments they already know and understand. Why limit yourself to stocks and bonds when you can invest in real estate, precious metals, promissory notes, private equity and joint ventures—and have more control over your returns—within a self-directed IRA?

At Next Generation, we help individuals make the most of their retirement savings and live up to their retirement goals through self-directed retirement plans. If you’re someone who’s comfortable making your own investment decisions and conducting your full due diligence about certain types of investments, you may benefit from self-direction.

Plus, with the SECURE Act provisions that enable workers to continue contributing to a Traditional IRA for a longer timeline, and delay taking required minimum distributions from their plans until age 72, there’s more time to build up one’s retirement nest egg with a broad array of nontraditional investments.

Want to learn more? Sign up for a complimentary educational session about self-directed IRAs with one of our knowledgeable representatives. Alternatively, you can call us directly at 888.857.8058 or email NewAccounts@NextGenerationTrust.com.

*Online survey conducted between October 26 and December 11, 2018 among a nationally representative sample of 5,923 workers who were U.S. residents, age 18 or older; and full-time or part-time workers who are not self-employed and work in a for-profit company employing one or more people.