General News & Insights

Things are not getting any easier for younger retirement savers. It is predicted that by 2060, the number of Americans who are 65 or older will have risen from 46 million today to more than 98 million – with this demographic accounting for 24 percent of the population (up from 15 percent today).*

Add to the mix the fact that college fees are at record high levels, entry-level wages are low and housing costs are high and a picture quickly establishes of increased financial pressure on a whole generation of retirement savers. In fact, for many aged 18 to 34, simply being a retirement saver may seem like a distant dream as, according to a report by Merrill Lynch and Age Wave, this demographic owes an average of $3,700 in credit card debt.**

The future of retirement planning in the United States is at a kind of crossroads: traditional employer pension plans no longer offer the gold-plated guarantees they used to and it is more incumbent than ever before that individuals devise their own strategies for their long-term financial futures. However, this has come at just a time when retirement investors face an additional pressure: as parents they are increasingly obligated to offer monetary help to their children.

This picture is supported by a recent survey by Bankrate.com* in which half of American parents reported placing their adult children's financial needs above their own retirement plans.

More than a decade of slow wage growth coupled with a cocktail of spiralling living costs – for example, housing, health insurance and vehicle insurance – mean that younger generations are facing unique financial challenges. Add into this mix the cost and increased popularity of higher level degrees, and it is easy to see why parents might want to help out.

A General Accounting Office report* has helped cast light on why the US government remains reluctant to drop the Foreign Account Tax Compliance Act (FATCA) system in favour of the globally-accepted Common Reporting Standard (CRS).

The CRS came into effect in 2014 as a response to international tax evasion, money laundering and other financial crime. Up until this point, it was extremely difficult for different jurisdictions to share information regarding accounts, income, assets and other financial arrangements. Those instruments that were available were severely limited and had little scope outside of the efforts of individual agreements between two countries.

The Organisation for Economic Co-operation and Development (OECD) changed all this by introducing the CRS, which has quickly become the global standard for exchange of information between the tax authorities of nation states across the world.

It's possible that you will never have to make any financial decisions more important than those relating to your retirement plans. These are likely to involve the consideration of a number of important factors, including the following:

Your present and future cashflow needs Whether you wish to create a legacy for family or charity Your level of risk-tolerance Whether you wish to simply protect or to grow your wealth An assessment of market conditions Your personal goals

Retirement planning for Americans is a complex affair in even the simplest of circumstances. For American expats living abroad however, trying to make sense of their options in relation to IRAs, Roth IRAs and other retirement accounts may prove to be a particularly headache-inducing experience.

The Foreign Account Tax Compliance Act (FATCA) has had many consequences, including some that have been both profound and unintended.

One legacy of FATCA – although positive factors such as tightened anti-money laundering regulations should also be taken into account – is the difficulty that many Americans abroad have faced in relation to their IRA accounts, with many being closed as the saver becomes US non-resident.

As a result, an increasing number of non-residents are finding themselves in an unenviable position when it comes to their retirement and IRA planning.

Probably the most significant age for anyone thinking about retirement planning in the USA is the age at which you start. While there's no set age or best age, the sooner you decide to start saving for your retirement the better.

As an expat in the US, deciding how to save for your retirement can be tricky, but the bottom line is, if you want financial security in the future, you need to save for it in the here and now. Talking to a financial adviser can help as the type of plan you opt for will depend on your individual circumstances and your retirement objectives.

One of the fundamental mistakes people make when planning for retirement in the US is to underestimate the possibility of developing a long-term chronic health condition and the impact that such an occurrence is likely to have on their spending power.

Yet the truth is that because we are living longer than ever before we are also more likely to need some form of help with the basics of day-to-day existence. Quite simply, whether by illness, accident, physical debilitation or mental decline, incapacitation and the consequent need for long-term care can happen to anyone.