The holiday season is a good reason for workers to set up a Roth IRA as a gift to themselves, according to this article on Nasdaq. Although clients pay taxes on the contributions that they make to a Roth IRA, they can still expect tax savings as their money grows tax-free and future distributions are exempt from taxes. For example, a 35-year-old married woman who contributes $5,500 annually to a Roth IRA until she reaches the age of 67 will end up with $518,000 and incur more than $130,000 in tax savings.
Workers who retire at 66 and continue working can expect their salary to be subject to Social Security taxes, according to this article on Forbes. The retirement benefit is based on their highest 35 years of indexed covered earnings, so they can see an increase in their benefit if their paycheck gets bigger and they replace one of those covered earning years. They can also expect an increase in their Average Indexed Monthly Earnings, their monthly benefit and other benefits for their loved ones if their income this year exceeds the taxable earnings limit of $118,500.
Retirees who are at least 70 1/2 years old should make sure they take their required minimum distribution from their IRAs before the end of the year to avoid a hefty tax penalty, according to this article on MarketWatch. IRA investors who are to take their first RMD this year are those born between Jan. 1 and June 30, 1946. “They have an option to wait until April 1, 2017, but will then be forced to take out two next year. However, this may make sense to defer if 2016 is a significantly higher tax year than 2017,” says a retirement expert.
While an immediate annuity offers guaranteed income throughout retirement regardless of market performance, some experts warn that the product has potential drawbacks that clients should consider, according to this article on Yahoo. One downside to immediate annuities is the fixed income that these products provide may not be enough to cover the retirees' rising costs in the future. When deciding whether to buy an immediate annuity, clients should check their tolerance for risk. "Older retirees who want certainty and don't want stock market risk will find some comfort in these vehicles. If you can tolerate stock market and other investment risk, then these might not be as attractive to you," says an expert.
Couples have special considerations to make with regard to estate planning and wealth management if they have no children, says a wealth adviser on The Wall Street Journal. Getting long-term care insurance is a smart financial move, especially if they have insufficient wealth to support their golden years, the expert says. Finance professionals assisting childless couples should prompt their clients to create a plan on how their wealth should be divided after their death, to consider a charity a beneficiary of their retirement plans, and to get the right amount and type of life insurance, the adviser adds.
