Our daily roundup of retirement news your clients may be thinking about.
To have a comfortable life in retirement, seniors should consider moving to a state that does not tax ordinary income, Social Security benefits or pension payouts, according to this article on Forbes. They may also want to downsize and sell personal items that they don't need, and get extra income by working part-time. Those who took the Parent PLUS loan may apply for refinancing in their name or their child's, or they may remove themselves as co-signer of a student loan.
Retirees are advised to study Internal Revenue Service Form 1099-R, as the form contains tax information about withdrawals from their tax-deferred retirement accounts, pensions, annuities and insurance policies, according to this article on Motley Fool. The form is prepared by financial institutions that manage these accounts, and retirees also get the form when they roll over funds into a tax-favored retirement account.
Maintaining a real estate investment could be a challenge for retirees, and they could face a hefty tax liability if they opt to sell the property that has appreciated over the years, according to this article on Kiplinger. While retirees may use 1031 exchange to avoid the tax burden when selling the investment, they need to replace the property with a similar investment. A better option is to exchange the property within a Delaware Statutory Trust, which allows them to diversify by property type and geographical location.
Claiming Social Security retirement benefit at age 62 could reduce the monthly benefit amount, but the move makes sense if clients don't expect to have a longer life span, according to this article on USA Today. Clients may also want to file early if it would only result to a small reduction in benefit value or they want their spouse and children to claim benefits on their record. Filing early also makes sense if clients have no savings or other income sources in retirement.
Making early 401(k) withdrawals can help participants reduce the amount of required minimum distributions that they need to take starting at age 70 1/2, according to this article on Money. However, clients should ensure they are at least 59 1/2 to avoid the 10% penalty on early withdrawals. Moreover, they should also be the owner of the plan and not their spouse to make a penalty-free withdrawal.
