Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about
The percentage of long-term savers who feel confident in their retirement prospects dropped to 76% last month from 77% in January, according to a recent survey in this article from The Wall Street Journal. The number of those still in the workforce who voiced optimism about their retirement readiness has also dropped to 63% in in March from 69% in January, the survey by the Employee Benefit Research Institute has found. Findings in the survey also state that this decline can be attributed to the ongoing coronavirus crisis. The “longer people stay at home and are out of jobs the more likely Americans’ confidence will falter,” says a research associate at the institute.
Clients may have to take advantage of the relaxed rules for tapping retirement savings under the CARES Act if they have no other options to cope with the financial hardships caused by the coronavirus pandemic, an expert in MarketWatch writes. Those who will dip into their retirement savings funds are advised to mitigate the downside of their decision, according to Catherine Golladay of Schwab Retirement Plan Services. "We urge people to seek professional financial guidance before turning to their retirement money so that you evaluate all alternatives and understand the long-term consequences, including missing future potential market gains and tax implications," Golladay says.
Seniors are expected to face a significant tax hit in retirement if their savings are mostly concentrated in tax-deferred accounts, according to this article in Kiplinger. To reduce the tax liability on their retirement income, they should consider doing a Roth conversion and direct more savings to a Roth account, as distributions from Roth accounts will not be subject to taxes. Another option is funding an HSA, which offers tax deductibility for the contributions, tax-free growth on savings and tax-free withdrawals for qualified medical expenses.
Wealthy clients share the fears that most people have about retirement but "with a more substantial cushion" when tackling the issues, an expert in Nasdaq writes. Having enough wealth is not enough and high-net-worth individuals need to resort to sustainable spending to maintain their prospects, according to the expert. To maintain their lifestyles, they are advised to make accurate models, create a budget as soon as possible and develop a plan before making significant changes to their finances, according to the expert.
The holdings in these top-performers “are companies that will be replaced, from a performance standpoint, over the next decade,” an expert says.
The SECURE Act has provisions that encourage employers to offer annuities in their 401(k) plans, but including these products in the plan can be a complicated decision to make, according to this article in Forbes. 401(k) participants also need some guidance on how to incorporate annuity in their retirement plan. “For in-plan annuities to be truly successful, employers will need to consider offering some element of education — preferably through a human — for these products to really take off in-plan," an expert says.
