Older Americans Month (OAM) is a nationwide celebration that happens in May every year. Spearheaded by the Administration for Community Living (ACL), the theme this year is Age Out Loud. As a strong advocate of educating Americans on the importance of saving for retirement to solidify successful futures, Midland Trust is happy support OAM. The self-directed retirement plan firm’s goal here is to add a bit of knowledge that can hopefully enable those who are aging achieve the retirement they desire by using self-directed IRAs.
Older Americans Month: Age Out Loud
As stated on the ACL website, “This theme shines a light on many important trends. More than ever before, older Americans are working longer, trying new things, and engaging in their communities. They’re taking charge, striving for wellness, focusing on independence, and advocating for themselves and others. What it means to age has changed, and OAM 2017 is a perfect opportunity to recognize and celebrate what getting older looks like today.
The theme and goal of Older Americans Month presents a perfect opportunity for individuals to evaluate their retirement planning endeavors. Points to consider include whether the ROI on established accounts is adequate and what individuals can do to solidify a successful retirement future.
Why is saving for retirement so important?
Saving for retirement is essential for many reasons. In fact, it is critical and Older Americans Month is the perfect time to focus on the specifics. Research has concluded that many Americans are facing a retirement crisis. The reasons why vary.
- Americans are living longer but fail to plan for it. Additionally, inflation and other costs of living make saving impossible for some.
- With the demise of pensions and employer-sponsored plans, many are left to rely on Social Security as a primary source of income when it was initially intended as a supplement to retirement.
- Optimists assume they will be able to work well into retirement age to meet their financial needs, yet according to a 2015 survey by USA Today, “50% of retirees left the workforce earlier than planned, and of those, 60% left because of health or disability problems and 27% because of changes in their company such as downsizing or closure.”
To further define the crisis, Baby Boomers and Gen-Exers are examples of how totally unprepared many Americans in their age groups are for retiring comfortably, if at all.
The Transamerica Center for Retirement Studies® reports the following:
- Two-thirds of Baby Boomers plan to work past the age of 65 or have no plans to retire at all.
- Thirty-four percent of Baby Boomers plan to rely on Social Security as a primary source of income when they retire.
- The median total retirement savings per Baby Boomer household is only $147,000.
- Only twelve percent of Generation X-ers are confident they will retire in comfort.
- Eighty-six percent of Gen X-ers are not confident that Social Security will be there when they retire.
- The total median retirement savings per Gen X household is $69,000.
Millennials, however, are appearing to grasp the importance of savings. According to the same TransAmerica statistics, the median age they started saving for retirement is 22, but one in four are unsure how their retirement plan is invested. A whopping 75 percent want more information from employers on how to reach their retirement planning goals.
The Millennial statistics are a great example of how people should put retirement savings in perspective. They began saving early in life. They may not know how their funds are invested, but they want to learn how to succeed. In essence, they are in control, but express the desire of knowledge and more control in securing successful futures.
There’s a great chance this age group, along with others, does not understand they have the ability to choose alternative investments in order to build desired retirement wealth. However, individuals have the ability to do so using self-directed plans.
Self-directed IRAs provide control over retirement funds and investing decisions.
Typical retirement accounts limit investment options to stocks, bonds, and mutual funds—assets offered by traditional investment banks and brokers who sell those options and make investment decisions for their clients. Clients can work with their brokers to a degree, but the options are still limited to the general Wall Street norms.
Self-directed IRAs are unique in that account owners have total control over their retirement funds and investing decisions. These plans are housed with self-directed retirement plan administrators like Midland IRA who do not sell investments. Account owners choose their own assets, based on their own knowledge and specific experience.
Along with controlling their funds, plan owners are able to use alternative assets to build retirement wealth. If the conditions are right, alternatives have the potential to produce a healthier ROI than traditional investments. Alternative assets create diversity in portfolios, which can hopefully balance out losses other options may suffer.
Alternative investments include:
- Real estate
- Private lending
- Private equity and stock
- Hedge funds
- Futures and foreign exchange trading
- LLCs, LLPs, and trusts
- Precious metals
The premise behind self-directed plans allows individuals to invest in what they know best. The alternative asset class is incredibly broad. The only options not permissible in these accounts are life insurance contracts and collectibles as defined in IRC Section 4975. Other than that, self-directed plan owners have the Freedom to Invest™ in a myriad of other assets to secure and protect retirement wealth. In the midst of Older Americans Month, this is good information to know, as self-direction provides a potential solution to a challenge many aging adults face.
There are several self-directed retirement accounts available. Individuals can also own more than one self-directed account if s/he chooses. Plans include traditional, Roth, SEP and SIMPLE IRAs. Individual or solo 401(k) plans, as well as education and health savings accounts can also be self-directed.
Not all custodians allow every alternative asset in plans they house—but Midland does. As a self-directed retirement plan administrator that serves clients across the nation who hold over $1 billion in assets, our mission is to provide exceptional service, customized to the unique needs and goals of each client.
Contact Midland today to discover the freedom and flexibility you gain when you decide to take control of securing your own successful financial future.