Our daily roundup of retirement news that your clients may be thinking about
Clients who don't want to get a loan to start a business may tap their 401(k) plans through a process called ROBS or Rollovers as Business Startups, writes CNN Money. The process enables clients to avoid paying any taxes by requiring them to incorporate a business and create a new 401(k) plan under it, into which they can roll their existing 401(k) money. With this strategy, their new firm can issue shares that they buy using money from the 401(k), and use the proceeds to cover operational costs. CNN Money
Workers may borrow from their employer-sponsored plan but will lose out on earnings even if they fully repay the loan, says Forbes. If they opt to take a loan from their 401(k) plan, they need to determine how much the loan will cost them and avoid borrowing again from the plan if possible. Clients also have to continue contributing to their plans and choose their nest eggs over less important goals, such as having a summer vacation. An alternative option that they might consider is a loan or withdrawal from their life insurance policy. Forbes
More people are thinking about their vacation plans than retirement planning, according to a survey commissioned by Edward Jones. Young workers make the mistake of forgoing long-term planning and investing, thinking that retirement is still two to three decades ahead. People will gain more if they set aside a small amount for retirement savings early on than saving a bigger amount in the years before they retire, according to the article. USA Today
For retirement planning, investors are advised to hold an equity portfolio outside their retirement plans since stocks and other assets meant for capital appreciation are subject to lower taxes than ordinary income, writes a guest contributor for CNBC. Unlike individual retirement accounts and 401(k) plans, assets outside retirement plans are also not subject to required minimum distributions and capital gains from these assets are usually written out upon death with a "stepped-up" cost basis, the contributor writes. CNBC
Retirees who want to secure a steady cash flow from their investment portfolio may consider selling covered calls against dividend-paying equities, writes an advisor with MarketWatch. While stocks that have high premiums are a good option, retirees should prefer large-cap stocks with lower volatility and decent dividends. Retirees can expect annualized returns of at least 4%, apart from a static return of about 7% from investing in large-cap stocks and combining them with call writing, the adviser says. MarketWatch
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