Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about
Seniors who intend to retire in the next few months are advised to consider deferring their plans until the market fully recovers, as market corrections are usually short-lived, according to this article in Motley Fool. Retirees will end up locking in substantial losses if they decide to cash out their investments during a bear market to generate income. “All of this volatility is enough to drive even the most seasoned investors crazy. But it can be especially tough on near-retirees, who may, at this very moment, find themselves wondering whether leaving the workforce in the near term is possible given what's going on.”
Now may be the right time for a Roth conversion, as the dwindling values and low tax rates will mean a lower tax bill on the converted amount, retirement expert Ed Slott says in this Morningstar article. Those who convert traditional retirement assets into a Roth are advised to ensure that they have non-retirement funds to cover the tax liability on the conversion, he says. "After you first evaluate it and believe you may really see a benefit here with low rates and low values, make sure you project the tax bill and you have the money, or you will have the money, by tax time next year to pay the bill."
Clients planning to retire may have to revisit a few decisions before leaving the workplace for good, as they have to tackle the realities created by the coronavirus crisis, according to this Forbes article. These new realities should prompt seniors to review the details in their retirement plan, such as when and how they will retire and when they will start collecting Social Security benefits. Those who are offered a lump sum pension payment by their employer are advised to resist the temptation, as the pension plan provides guaranteed income that will help them mitigate longevity risk.
The funds are also some of the lowest-duration products in the market.
An employer-sponsored 401(k) plan remains a great place to save for retirement amidst the market volatility, especially for young workers, according to this article in CNBC. “If you’re in your 20s and you see your parents freaking out over the stock market, that would have an influence on you. But the thing is, you’re in a very different part of your investing career than they are," says an investment expert. "The point is, a down market is your friend while you are in the accumulation stage of your life.”
