Five Threats to Retirement Savings

Saving for retirement does not always go as planned. Retirement savings are subject to threats, both direct and indirect. Some of these threats are just unfortunate circumstances, while others are deliberate actions trying to take advantage of the investor.

  1. Boomerang Children

These are the children of the Boomer Generation that are still being supported by their parents by living at home. According to a study by Hearts & Wallets, only 21 percent of Boomers still supporting their children are fully retired, compared to the 52 percent who are not supporting their children.

To avoid this threat, investors need to teach their children how to properly handle finances and be self-sufficient. This way they are less likely to move back in with their parents due to money issues.

  1. Caring for Parents

As investors’ parents age, they often need help either with personal care or finances. Helping them financially can make it more difficult for the adult child to save for retirement. Also, 25 percent of adult children younger than 65 help parents with chores, personal care, etc. This may lead to less time spent at a paying job, causing them to earn less than they otherwise would earn.

Although difficult to avoid, there are assistance programs and other means for children to help their parents get what they need without sacrificing their time at work.

  1. Spousal Death without Life Insurance

For those who have a mortgage, debt, or children to support, life insurance can be critical. It can also be critical to those in their final years of saving for retirement. The loss of that second income can hit a spouse hard financially, making saving next to impossible.

Spouses should evaluate life insurance options and have a clear plan if something were to happen to one of them.

  1. Medical Crisis

In the US, medical bills are the leading cause of bankruptcy. Those with injuries or a chronic illness might not be able to work, causing investors to dig into savings to pay for medical bills. Long-term care is also very expensive and can derail even the most stable retirement plans.

Health Savings Accounts are one way to battle this issue. With this account, investors can use it to pay qualified medical expenses tax-free at any time.

  1. Scams

There are plenty of people attempting to scam people out of their retirement savings. The Financial Industry Regulatory Authority advises people to be cautious around schemes that promise returns of 12 percent or higher. Often these scammers use early retirement seminars to pitch their strategies.

Being aware of potential threats is the first step to avoiding them. Meeting with a financial planner can also help to address concerns investors might have about their retirement savings. To maximize potential retirement savings, contact Mountain West IRA to learn about their self-directed accounts and investment options.

The Balancing Act

Many younger workers have the task of balancing debt reduction with retirement savings. Often the debt they have accrued is related to student loans and credit cards. Many of these workers believe they need to pay off their debt before they begin actively saving for retirement.

However, to be able to save a sufficient amount for their golden years, young workers are going to need to save while also paying off debt. Here are some ideas on how to do that:

  1. Focus on High Interest Debt

Getting out of high interest debt should be a priority. Credit cards are usually the main culprit with interest rates as high as 18 or even 25 percent. Once rid of high interest credit card debt, try to stay out of it. When these debts are out of the way, there will be more funds available to allocate to retirement savings.

  1. Be Smart with Loans

Often, loans are just a necessary evil in life. This is especially true when making large purchases, such as buying a new car. Try to find the best deal possible, with smaller payments. Sometimes this means buying a used car or a less expensive option. The larger the down payment, the smaller the monthly payments. With smaller payments, more money can be put toward retirement.

  1. Set Realistic Goals

Instead of having an illusion of spending very little in retirement, plan for spending more. The average annual spending for those age 65 and older is $40,938. Workers need to realize they will probably spend more and account for that in their savings.

This is especially true of spending money on healthcare. Many retirees do not account for medical needs when saving. One way to be cognizant of upcoming healthcare costs is to start a health savings account. These accounts help retirees cover the medical costs rather than dipping into their retirement savings.

Often, younger workers are only encouraged to take advantage of a 401(k) match plan through their company. While this is a great tool, opening a separate account in addition to a work-sponsored one can bump up their savings potential. Visit Mountain West IRA’s website to learn about their retirement plans and investment options.

Savings Tips for Millennials

Millennials are struggling to save and pay off student debt at the same time, putting them behind in the retirement savings area. The ones that are managing to save, aren’t saving what experts consider enough. There are some things they can do about it though.

Cut Costs

One of the biggest expenses on Millennials’ plates is housing. Before signing the lease to the really nice apartment with a pool, dishwasher and other extras, take a moment to reconsider. Most people can probably get along just fine without a few of the extra amenities and put the rent savings aside for retirement.

Create a Budget

This goes for everyone, but Millennials should get into the habit of creating a budget early on. Tracking spending can help determine how much money is spent on necessary purchases and how much is spent on extras. After creating a budget, it is easier to put more into a retirement savings account.

Adjusting Savings

Millennials should make it a goal to increase how much they save for three months. This can prove it is possible to save more, with a few lifestyle adjustments. It might mean having to cook at home more than eating out with friends, but it will be worth it later on.

These all seem like fairly easy tips, but putting them into practice is the difficult part. Millennials are in the spot where they’ve begun a career and are probably making more money than before. However, instead of saving the extra, Millennials, like many others of all ages, tend to increase their spending.

The tips listed about can help deter this habit and get Millennials on the right track for retirement savings. For those who haven’t yet set up a retirement savings account, contact Mountain West IRA. They have an option that is right for everyone.

The Lazy Man’s Retirement Plan

At the end of the day, most people just want to relax and turn off their brains. They don’t want to think about their retirement accounts or investments. However, not keeping these things in mind, and making time for them could be detrimental to the future.

With time, life has become about convenience. People want things done fast, and with the least amount of stress possible. Investing and managing money is neither of those things. To get the “lazy person” to invest and save for retirement, it needs to be made simple.

One way to make things simple is to have a certain amount of money pulled out of each paycheck. This way the investor doesn’t have to think about it, the money is automatically put into their retirement account and begins gathering interest.

Open an account outside of work. Mountain West IRA offers many types of retirement accounts for investors to provide investing freedom. For those who don’t have the time to learn to play the stock market, or don’t want to, Mountain West IRA offers other, simpler investing options. They could invest in real estate, precious metals and more.

Start early and let the money continue to grow with interest over the years. This is probably the easiest and simplest way to get money for retirement. However, it might not always be enough, which is why there are other investment options. It might take a little more time and attention, but investing will help beef up retirement savings.

For those interested in opening an account outside of work, contact Mountain West IRA and talk to them about their retirement account options.

Borrowing Against Your 401(k)

Many people believe borrowing from their 401(k) account is a smart idea because the interest rate is generally lower than a commercial loan. While that might be true, it doesn’t help with the ultimate goal of long-term investing. Here are some of the reasons why borrowing from a 401(k) isn’t the best choice:

  1. Stop Saving: Many plans won’t let investors make any contributions to the account until the pay off the entire loan. Or the borrower will be unable to make contributions because they will paying off the loan. Either way, there is no money growing in the account.
  1. Financial Red Flag: If someone is having to borrow from their 401(k) after exhausting all other options, it could be a sign that they are living beyond their means. This is a habit that could possibly follow them into their retirement years, making it difficult for them to retire with a decent amount saved.
  1. Career Issues: Often these loans must be paid back immediately if the investor quits their job. That could trap them in their current job, or cause issues if they suddenly lose their job.

Before an investor borrows from their 401(k), they should think it through completely. Use a different way to finance the loan if possible. Or, maybe they need to reevaluate their lifestyle and why they need the money in the first place. Borrowing from a retirement account could have significant long term consequences.

Saving for Retirement and Paying for College

It can be a tough decision for most people when choosing the most beneficial way to spend or save money. Many people think choosing to invest in their retirement is a better option than paying for their children’s college tuition and here’s why:

  • Teens applying to college, can apply for student aid. Students are often eligible for scholarships, grants, and loans to help them cover the cost of tuition. Many students work part time during college to help pay for the fees as well. They do have some options when paying for college other than having their parents finance it.
  • While students have alternative ways of covering the cost of college, their parents don’t have many alternatives when it comes to financing retirement. What they save over the years is usually what they will have to live off during their retirement years. Some retirees are lucky enough to find part-time work if they don’t quite have enough money saved up, but some can’t because of age or illness.

You can save for both retirement and still help pay for college by starting early and making retirement the first priority. Before the kids come along and while they are still young, save as much as possible in a retirement account before putting anything in a college savings account. Time and compounding will be on your side.

Mountain West IRA offers many different self-directed IRA options when it comes to retirement accounts. They will have one that can help you save for retirement before saving for the college years.