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.

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.

Retirement Saving as a Small Business Owner

Small business owners are in a different boat when it comes to saving for retirement. Unlike their employees, business owners don’t just check a box once to keep taking money out of their paycheck each payday. This means they have to be even more disciplined when it comes to saving money. They don’t have the luxury of not thinking about it.
To stay disciplined, many business owners have found setting a goal to challenge themselves can encourage them to set a certain amount aside each month. Goals are good motivators and increasing those goals every couple of months could help set aside a decent amount for retirement.
Treating saving for retirement like a bill, is another trick used by many successful small business owners to consistently save each month. A self directed SEP IRA account can be the perfect vehicle for business owners to use when saving for retirement.
Business owners who have a flexible income often find deciding on a percentage of their income rather than a fixed amount can be a more practical approach. Also, taking small steps into saving can help. Instead of planning on a huge percentage if it isn’t practical at the time, start small and build up.
The individuals at Mountain West IRA can help small business owners set up a retirement plan to help them successfully save. They offer many options and can help determine which retirement program will best fit the situation.

Prohibited IRA Transactions and Holdings

There are many choices when deciding how to invest your self-directed IRA. There are also rules that you need to be aware of before investing.  Violating the rules on transactions prohibited in your self-directed IRA can make your IRA account subject to risks and penalties. These transactions are prohibited because they are considered as providing immediate financial gain to you or other disqualified persons.

 A disqualified person includes the account holder, their spouse, descendants, investment advisors/managers and any corporation, partnership, trust, or estate in which the holder had a 50 percent or greater interest.

As a Self-Directed IRA holder, you may not:

  • Borrow money from or lend to the IRA
  • Sell, exchange or lease property to the IRA account or from the account to yourself
  • Use the IRA as a security for a loan
  • Transfer plan income or assets to disqualified persons
  • Lend account money to disqualified persons
  • Extend credit on their IRA to disqualified persons
  • Furnish goods, services, or facilities to disqualified persons
  • Allow fiduciaries to obtain or use the plan’s income or assets for their own interest

There are also prohibited holdings in a self-directed IRA. These include:

  • Collectibles
  • Metals other than gold, silver and palladium bullion
  • Gems
  • Stamps
  • Coins
  • Alcoholic beverages and other tangible personal property as defined by the Secretary of the Treasury

There is an exception to the coin holding. Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins and certain gold, silver, palladium, and platinum bullion.

In general, a self-directed IRA account is extremely flexible, however, it is important to stay within the guidelines as the penalties can be significant.  As one of the nation’s leading independent self-directed IRA and 401(k) administration companies, Mountain West IRA not only guides investors through the process of establishing a self-directed IRA account, but also ensures accounts are maintained to avoid prohibited transactions.