Our daily roundup of retirement news your clients may be thinking about.
More seniors fell victim to financial abuse by their family members or fraudsters, and some states are moving to stem the trend, according to this article on New York Times. Retirees are vulnerable to financial exploitation as the government has no formal systems for complaints and interventions. “There is a sense that this is a family matter, and we shouldn’t intrude. But we’re talking about a crime,” says an expert.
Clients are better off holding low-cost passive funds than keeping actively-managed funds with high fees, according to this article on CBS Moneywatch. “Generally speaking, active managers have had difficulty adding value about an appropriate benchmark,” says an expert. “There is no real consistency. Even among the best managers, there are going to be periods during which they are going to perform poorly compared to their benchmarks.”
Inflation poses a serious risk to people's retirement, especially for those who are to rely on a fixed income, according to this article on Kiplinger. To prepare for the impact of price increases on their money's purchasing power, clients should factor inflation in computing how much income they would need after they retire. They should keep a portfolio that includes investments with high return potential, and develop a budget that separates fixed costs from their social expenses and identifies income streams to cover these budget items.
Clients have to take required minimum distributions from their Roth 401(k) when they reach 70 1/2, but the distributions are nontaxable income, according to this article on Nasdaq. Those who are still working are allowed to defer the distributions until they leave the workforce for good. Clients may consider moving their Roth 401(k) assets into a Roth IRA before they retire if they want to avoid taking the RMD at age 70 1/2.
While retirees may no longer owe tax on wage income, they still face a tax bill on other sources of income, according to this article on Motley Fool. For example, the sale of investments can trigger taxes, while required minimum distributions from their tax-deferred accounts are taxable events. Depending on their combined income, retirees may also face income tax on a portion of their Social Security benefits.
