Clients don’t need high-paying jobs to become millionaires

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Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about.

Clients don’t need high-paying jobs to become millionaires
Investing in a 401(k) or another retirement account is key for clients who want to become a millionaire, researchers have found, according to this article in CNBC. Misconceptions, however, prevent investors from building wealth. For example, it is wrong to think that people became millionaires because they received an inheritance, as most of them didn’t inherit anything, a researchers says. Clients who want to build wealth should use all financial tools available to them, including tax-advantaged retirement plans such as 401(k)s and IRAs.

7 ways clients can retire with $1M
Clients are advised to prioritize saving and budgeting if they want to end up with $1 million in retirement, according to this Fox Business article. They should start building their savings early, make the most of tax-advantaged retirement accounts and avoid taking early withdrawals from these accounts. Making catch-up contributions to these accounts, minimizing debt and automating deductions are other strategies that will help clients achieve their $1 million retirement savings goal.

Are your clients using their target-date funds incorrectly?
Many retirement investors who hold a target-date fund in their 401(k) plans supplement the fund with other investments, a study by Morningstar has found. This is a mistake, as a target-date fund is a diversified portfolio meant to be held alone, an expert writes. “You select a target-date fund based on your projected retirement year — approximately age 65 — and the investment mix dynamically shifts throughout your working years. As you approach retirement, your dollars carefully shift from riskier funds (stocks) to less-risky funds (bonds).”

They have time on their side, but compounding won’t work if they’re all in cash.
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3 timeless lessons for your retirement plan
Clients who want to succeed in retirement planning are advised to save more than enough, as living expenses could be higher than expected, according to this Forbes article. They should also acknowledge and prepare for all possible risks, as well as update their retirement plan when necessary. “Your plan needs to be a living, breathing thing that you and your advisor work on every quarter or at least every year,” says a wealth advisor.

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Retirement income Savings accounts Target date funds 401(k) Retirement planning IRAs