Are Self-Directed Retirement Plans Right for Gen Xers?
Younger baby boomers and the citizens of Generation X right behind have some serious planning to do for their retirement, and we aren’t talking about where to vacation. These people are still working and some of them will be working for several more decades. That’s a good thing in terms of saving for their retirement, as studies show they are woefully unprepared to finance their retirement years in the style they are now living.
Although all those of the baby boom generation were hurt by the Great Recession by losing a significant chunk of their retirement savings (about a quarter of assets), older baby boomers have had ample time to save for retirement (or so the theory goes), enjoyed many decades of favorable markets and growing assets, and many sold their homes at peak prices before the real estate market tumbled in 2008. Younger boomers have had less time to build up retirement savings and were hurt by the dot com meltdown and sagging stock market after 9/11 as well as the Great Recession of recent years.
But Gen Xers—those born between 1965 and 1975 to 1980 (depending on whose figures you use) has been hit very hard, having started their investment lives during economic downturns, near-record unemployment, and a busted housing bubble—just as they were establishing careers and starting their retirement plans. In many cases, they have also been establishing home ownership and starting families.
- Gen X members lost approximately 45% of their retirement account values and also are carrying, as a group, more debt than their elders.
- A Pew Research Center study revealed that people in their mid-30s are the least confident about their ability to finance their retirement.
- Pew also found that households age 35-44 are now 44% poorer than their counterparts of the same age in 1984.
- This age group also saw a 59% decline in median household net worth between 2005 and 2010, the largest drop of all age groups.
Attention Gen Xers: Take Control of Your Future through Self-Direction
Although there are many factors affecting household wealth that none of us can control—the world economy, our company’s benefits program, interest rates, etc.— there are factors we can control when it comes to saving for retirement. With a self-directed retirement plan, investors make all their own investment decisions and are not restricted to the stocks, bonds, and mutual funds of typical bank or brokerage accounts.
If you are someone who understands investing in alternative assets, a self-direction retirement plan could be right for you. There are myriad ways to build an eclectic retirement portfolio through self-direction: real estate, commodities, investing in startup companies, precious metals—the list goes on. You might even be investing in some of these nontraditional assets outside of your existing IRA, in which case you should take a look at how a self-directed IRA can boost your retirement savings by diversifying your portfolio—a lot.
If you are a member of Generation X you have time on your side to branch out and make a comfortable retirement a reality. Even baby boomers may consider opening a self-directed IRA—there are no age limits for these types of retirement accounts. You can roll over an existing 401(k) or open a SIMPLE or SEP IRA if you are self-employed. All the same types of retirement plans that you find through your broker are available as self-directed plans.