Our daily roundup of retirement news your clients may be thinking about.
While many clients dream of leaving the workplace at an early age, an early retirement can have downsides, writes an expert at The Wall Street Journal. Early retirees are likely to suffer from physical and cognitive decline as they become inactive and could develop unhealthy behaviors such as drinking and smoking, writes the expert. "Many of these studies clearly show that health problems intensify after workers qualify for retirement benefits and abate after policies encouraging work are introduced."
As more companies shift from pension plans to defined contribution plans, employees may be better off taking a lump sum distribution than choosing the annuity option, especially if they work with an experienced CFP, writes an expert on Kiplinger. "Rolling the lump sum into an IRA preserves the tax-deferred nature of the funds and provides flexibility with future withdrawals," the expert explains. "As the IRA owner, you own the account and therefore control the distributions."
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Errors are regrettably common. They are also easily avoidable.
April 1 -
Military families can use one of these provisions to seriously cut their tax burden. Plus, can clients make an IRA contribution on behalf of a deceased person?
October 23 -
Financial planners don’t have to be attorneys to help clients avoid high cost oversights
December 24
About 25% of 401(k) participants below the age of 35 have dipped into their retirement accounts, according to an article on MarketWatch. Many respondents to an industry survey said they made an early 401(k) withdrawal to pay credit card debt. This presents numerous disadvantages, such as missed earnings opportunity and a 10% penalty on top of federal taxes on the withdrawn amount.
Clients who are in their 40s are in a better position to save for retirement, as they are reaching the peak earning years of their career, according to this article on Bankrate. This means they should consider paying down debt and contributing the maximum amount to their retirement plans. They could also save in a traditional or Roth IRA to take advantage of the account's tax benefits, reduce their exposure to risk, maintain the right mix of investments and get adequate insurance coverage.
