New data has shed light on alarming investment decisions that people in their 50s and 60s are making for retirement. According to a recent article on NextAvenue.org, of the “consistent traditional Individual Retirement Account (IRA) investors” that are in their 50s, about one third have 100 percent of their IRA money in stocks. And for those 60 to 64 years old, a quarter of IRA investors have all of their IRA’s in stocks.
Given the volatile fluctuation of the stock market, placing the entirety of ones’ savings into stocks may be a risky decision. However, these statistics can be deceiving. Wade Pfau, Professor of Retirement Income at the American College iterates, “My IRA is 100 percent in stocks as well, but my overall asset allocation is not.” So if your IRA were to be completely invested in the stock market, Pfau suggests that your other private assets should be diversified into different types of savings. Fortunately, the data reveals that a significant number of older Americans are doing just that.
Ric Edelman, Chairman and CEO of Edelman Financial Services, states a bigger-picture argument: “I’m more interested in whether you’re saving for retirement. I’m not terribly concerned about how the account is registered.” The priority is to ensure one will have funds for retirement, and with inflation causing a rise in the cost of living, it is vital pre-retirees secure a trustworthy return. Edelman touches upon the cost of living for retirees: “Because of the cost of living that retirees incur, particularly with health care, it’s vital that they continue to earn a competitive rate of return – which they can’t do in today’s low interest rate, fixed income world.”
Dan Keady, Director of Financial Planning at TIAA-CREF, is troubled by how few Americans are actually investing in IRA’s in preparation for retirement. According to a study conducted by TIAA-CREF, only 17 percent of the public now contributes to IRA’s. Keady voices his concern: “With the economy improving, you might expect more people to contribute not less.” Only 20 percent of Americans ages 55-64 contribute to IRAs.
Tags: dan keady, ira, next avenue, retirement, ric edelman, stock market, tiaa-cref, wade pfau
