In a recent report published by the Center for Retirement Research at Boston College, studies show that employer-sponsored plans are providing less income today than in the past. The analysis addressed how the transition from defined benefit to defined contribution plans (such as 401(k)s) affected retirement wealth between 1992-2010.
The results showed that the income produced by each dollar of retirement wealth has declined, despite a tendency for workers to retire later. Additionally, the amount of income relative to a worker’s earnings has declined.
The report concluded that, “Without significant changes…future retirees will be much more dependent on Social Security than those in the past, which is problematic given the reduced support due to the rising Full Retirement Age and the need to close the program’s long-term funding gap.”
The bottom line is that employer plans are providing less retirement income today than in the past. So what does this mean for retirement investors?
Retirement investors are not helpless to the decline of social security and decline of wealth in 401(k)s. Through self-directed IRA investing, investors can choose an alternative asset market to grow tax-free (in a Roth IRA) or tax-deferred (in a Traditional IRA) wealth for their retirement.
IRA owners can initiate a rollover from an old employer’s plan, such as a 401(k), to any other type of self-directed IRA. The IRA funds are rolled over from one IRA provider or qualified retirement plan to the account owner, who then deposits the funds into a new IRA with another IRA provider. The account owner has 60 calendar days to complete this move. If the process is not complete within 60 days, the value of the cash and/or assets are considered a taxable distribution of funds.
Alternative assets that investors can purchase with their self-directed IRA include real estate, precious metals, private equity, private lending, and more. These investments are not tied directly to the fickle cycles of the stock market, and retirement investors may already have experience with these asset markets.
To learn more about how you can take control of your retirement wealth today, contact New Direction IRA to learn more about self-directed IRA investing.