Our daily roundup of retirement news your clients may be thinking about.
Major home and car repairs are among the common emergencies that catch many retirees financially off-guard, according to this article on U.S. News & World Report. Running out of retirement funds and medical expenses are other contingencies that many seniors commonly face. Read more about these scenarios and how retirees can prepare and overcome these financial hurdles.
Taking required minimum distributions trigger income tax liability, and clients can minimize the RMD-related taxes they will owe in retirement by funnelling some of their retirement funds into a Roth account, according to this article on Morningstar. A Roth account is not subject to an RMD and withdrawals are exempt from income taxes. Retirees may also reduce their RMD-related taxes by making qualified charitable distribution, which allows them to make charitable donation directly from their IRA and avoid taxes on the withdrawn amount.
While retirement investors can check the fees they pay to their 401(k) manager, many participants are unaware that their middlemen are overcharging them, according to this article on Forbes. To avoid paying excessive fees in their 401(k) plans, clients should determine whether their employer absorbs the cost or pass it on to them. They should also determine what the costs are for and ask their employer if it has done an independent audit recently. 401(k) participants should pay "all-in” expenses not exceeding 1% of their balance, and check whether the employer receives a discount from the plan manager.
As of January 2016, retirees receive an average of $1,341 in Social Security benefits, but clients can increase their benefit value by delaying the benefit until they reach the age of 70, according to this article on MarketWatch. Filing for retirement benefits before the full retirement age could permanently reduce the monthly benefit payouts, while those who delay the benefit can expect 8% per year increase in their benefits. Deferring the benefit is highly recommended to married couples. “Doing so increases the amount that the couple receives a month as long as either spouse is still alive...," says an expert.
Singles who are getting close to retirement are advised to create a retirement plan that spans a longer time horizon and step up their efforts to save for the golden years, according to this article on Yahoo Finance. They should also invest their retirement funds, find a new meaning or sense of purpose, and determine their cash flow and expenses. Clients are advised to reduce the stock allocation in their portfolio, consider getting long-term care coverage and disability insurance, update their estate records, and identify possible sources of income in retirement.
