Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about.
Clients who want to save for their children’s education may be better off using a 529 plan than a Roth IRA, according to an article from Bankrate. That’s because, aside from the state income tax deductions, tax-deferred savings and tax-free withdrawals for qualified expenses, a 529 plan allows parents to dip into the savings without penalty before they reach the age of 59, unlike in a Roth IRA. A Roth IRA may be a better option if parents may need the money for non-education purposes.
Saving for retirement early and consistently may not be enough for clients to retire at the age they intend to leave the labor force for good, according to an article in Motley Fool. To accomplish this, clients should consider taking on a more aggressive approach to investing. This means weighting their portfolio with stocks and limiting their assets in bonds and other conservative investments.
Studies have found contrary results around best glide path, for retiring investors to change their portfolios’ ratio of stocks relative to less risky assets like cash and bonds over time, writes Morningstar’s Christine Benz. This should mean that “the ‘right’ glide path for your retirement years is pretty individual-specific,” experts say. “It depends on your level of assets relative to your spending, your risk tolerance, and your ultimate goals for your portfolio, among other factors.”
Chartered financial analyst Wade Pfau says that clients who want to create a guaranteed income stream in retirement will be better off with an income annuity than cash or bonds, according to an article in Money. An annuity is more efficient compared with a bond ladder in generating guaranteed lifetime income, according to Pfau. Bonds in a ladder have maturity dates and investors may not have the same or better interest rates when they reinvest the assets, he says.
