Inherited 401(k)s: 6 questions clients need to ask

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

Inherited 401(k)s: 6 questions heirs need to ask
Clients who are expected to inherit a 401(k) from a loved one are advised to know the plan’s rules to ensure that they will get the most of the inheritance and minimize the tax liability, according to this article on Kiplinger. For example, their relationship to the original 401(k) owner will determine whether they can roll over the inherited assets into their own 401(k) plan or not. They should also check whether the original 401(k) owner has started taking the required minimum distributions to know their claiming options and make the right decisions.

How 401(k) savers can avoid a nasty surprise come retirement
Although taxes on traditional 401(k) contributions are deferred, distributions will be subject to ordinary income taxes in retirement, according to this article on MarketWatch. This means workers should not direct all their savings to a traditional 401(k) to minimize their taxable income in retirement. They should consider sock away some of the money in a Roth 401(k) if their plan offers such a feature, as it is funded with after tax dollars in exchange for tax-free contributions.

Retirees are fleeing these 3 states in droves
New Jersey, Maine and Connecticut saw the most number of residents relocating to other states, with a big percentage citing retirement as the main reason for moving, according to this article on CNBC, citing a survey by United Van Lines. Most of the people who decided to relocate moved to New Mexico, Florida, and Arizona, with retirement as the main motivation for their decision, the survey also found. Experts say that many seniors opt to relocate to other states to reduce their cost of living and minimize their tax liability.

Federal employees soon will have more options to withdraw money from their retirement accounts
Officials of the Thrift Savings Plan announced that the plan is on track to implement new account withdrawal options for federal employees and military personnel who are contributing to the plan, according to this article in The schedule is set in September. Federal employees are “going to have a lot better withdrawal options. They’ve been very limited in the past and I think it’s going to be very beneficial,” said Michael Kennedy, chairman of the program’s governing board.

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