Social Security sign-up can bring an unpleasant surprise: Retirement Scan

Our daily roundup of retirement news your clients may be thinking about.

Social Security sign-up can bring clients an unpleasant surprise
Retirees that are at least 65 years of age, with a tax-deductible health savings account, can no longer make contributions upon filing for Social Security and the subsequent sign-up for Medicare Part A coverage, reminds this article in Kiplinger. According to IRS rules, retirees are actually required to stop HSA contributions six months prior to receiving Social Security benefits. It is important for retirement-age workers to consult their employers about other health plan choices and comparable support if they receive HSA employer contributions before they start filing for Social Security. — Time Money

Social-Security-sign-iag-2016
A sign marks the entrance to the headquarters of the Social Security Administration located on Security Boulevard in Baltimore, Maryland on January 11, 2005. Photograph: Dennis Brack/Bloomberg News

What to do when your clients have employer stock in their retirement plan
A client who has changed jobs and has employer stock in his ex-employer’s retirement plan could be better off getting an in kind distribution of the stock rather than rolling the funds over to an individual retirement account, according to this article in Kiplinger. If your stock qualifies for the tax concept called “net unrealized appreciation,” tax and penalties will be applied to the cost basis of the stock and not the stock’s full market value. Tax on the NUA or the amount an employer’s stock appreciates is deferred until you sell the stock and it is treated as a long-term capital gain. Heirs to the stock will only need to pay long-term capital gains on the NUA amount and not the appreciated value of the stock. — Kiplinger

Where to find retirement income that rises with inflation
Fixed retirement income can become a problem for retirees as living costs, expenses and inflation increases throughout their retirement years. Clients are advised to make smarter investments on assets that may increase over time, according to this article in Forbes. Retirees should ask their financial advisers about investing in Treasury Inflation-Protected Securities, which are designed to protect investors from inflation and pays interest every six months. Other investments that may be good for combating inflation include annuities, stocks and commercial real estate. — Forbes

Public pension plans’ risky investments could cost taxpayers billions
A study found that more investment risks are being taken by U.S. public pension plans to maintain low government contribution rates but this strategy may end up increasing taxpayer expenses in the long run. A typical public pension plan fell over 7% short of 2016 targets. An expert said that legislatures could slash spending, raise taxes or reduce budgets for police, firefighters, teachers or Medicaid to make up for shortfalls in pension funds. — Money

5 times it's OK for clients to delay retirement savings
Paying back a 401(k) loan is one valid reason to temporarily delay saving for retirement because outstanding balances become taxable income and it could trigger income taxes and additional tax penalties. Other valid reasons include major medical expenses, paying off high-interest credit card debt and building an emergency fund. People stuck with a forced-transfer IRA after changing jobs should also hold off contributing to the account until they have a 401(k) with their new employer where they can roll over the balance of the forced-transfer IRA. — WiseBread

For reprint and licensing requests for this article, click here.
Retirement planning Retirement benefits 401(k) Social Security Medicare IRAs Annuities Pensions IRS
MORE FROM FINANCIAL PLANNING