Why Most Americans Are Not On Track to Retire

Self-directed IRAsOne of the recurring themes here at American IRA, LLC-a national Self-Directed IRA provider, is that Americans are woefully unprepared for retirement. This is true at all ages. The other thing we see, very clearly, is that conventional retirement investing, while a positive, is not going to be the ticket to a prosperous retirement that it once was. If you are starting out, or even in mid-career, you are either going to have to eke out some additional return from your portfolio over and above what conventional assets – broad stocks indexes, bonds, mutual funds, annuities and the other stuff you hear most about – are likely to deliver, or you are probably going to have to substantially increase your contribution to retirement savings.

The 80s aren’t coming back.

Workers who began their retirement savings with the advent of the 401(k) plan, in the early 1980s, taking advantage of generous employer matching contributions, were lucky. Their contributions had the advantage of a long bull-market tailwind that lasted or nearly 20 years – until 1999, before the Internet Bubble cut the recovery off at the knees. Between 1982 and 1999, stock market multiples rose from less than 10x earnings to close to 40, while dividend yields fell substantially.


Bond investors likewise benefited from a huge tailwind of falling interest rates over the same period of time. As you know, when yields fall, bond prices rise – benefiting those who are already invested.

So now we have bond prices very close to fully-valued, while yields on bonds are very close to record lows. CDs are paying 1 or 2 percent, after taxes, max.

The Decline of the Traditional Pension

Meanwhile, the pension plans that had served workers so well from the 1950s through the 1980s are largely relics of the past. American manufacturers, faced with extremely tough foreign competition, cannot support the generous pension payments to retired workers that prior generations enjoyed simply can no longer make these payments. The Big 3 Automakers collapsed spectacularly under the pressure, but corporations have been rolling back pension plans substantially for the past 30 years, migrating to 401(k)s. Better than nothing, but the worker is forced to take on all the risk of under-performance.

Social Security

Social Security is unsound. Something is going to have to give, and that something is likely going to be benefits for more affluent Americans. It’s the only solution that will enjoy enough voter support to be viable, when the reckoning eventually comes. Wealthier Americans under 40 – and those under 40 who plan to become a wealthier American – should not count on receiving their full Social Security benefits, but will likely receive a reduced amount.

Asset Classes

To make up the difference, Americans must look beyond conventional asset classes to those with stronger expected returns. The best options will vary with the expertise, comfort level and risk tolerance of every investor. But it’s time to think beyond the limited menu of blue-chip stocks, bonds and mutual funds, and look for new ways to boost returns in long-term investment portfolios.

Americans will also need every tax break they can get to have a shot at saving for a comfortable retirement income that will support the lifestyle of their choice. That’s where Self-Directed IRA investing comes in. IRAs, 401(k)s, SEPs, SIMPLE IRAs and Health Savings Accounts, to name a few, provide an important source of tax leverage and a layer of wealth protection as well.

The IRS is fairly generous with the asset classes you can choose from when selecting investments in these accounts, as long as you don’t do business with certain prohibited individuals, and as long as you don’t use these accounts to invest in life insurance, gemstones, collectibles, alcoholic beverages, art, jewelry or certain types of precious metals that have inconsistent standards of purity.

Your Options are Exciting with Self-Directed IRAs!

Here are some examples of what you CAN invest in within a Self-Directed IRA:

o   Real estate

o   Gold, silver and/or platinum (with certain restrictions)

o   Land banking

o   Shares in a closely-held corporation

o   Oil and Gas

o   Partnerships and LLCs

o   Farms and ranches


o   House-flipping

o   A private business (provided you do not draw a salary)

o   Commercial property

o   Foreign real estate

o   Tax liens and tax certificates

…And much more!

Many of these options allow for leverage, which can boost returns but boosts risks as well. Leverage can be an important part of your strategy, but be aware that borrowing within your IRA may result in unrelated business income tax liability.

The good news, though: If you are good at it, chances are you can do it – with all the advantages of a tax-advantaged retirement account.

If you have experience or expertise in any of the activities above, you won’t want to miss our upcoming seminars on Getting Started in Self Directed IRAs.

Topics covered include:

  • Why most Americans are not on track to retire.
  • What is a Self-Directed IRA/401K?
  • How to UNLEASH your IRA or 401K to invest in what you UNDERSTAND.
  • The process to make an investment with your Self-Directed IRA/401K.

Register here. They are 100 percent free, available online, from the comfort of your own home or office, with no obligation.

We look forward to the opportunity to serve you!