Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about.
Older workers are making the mistake of underestimating their health care costs in retirement, according to a study by Nationwide in this article from Motley Fool. Data from the study shows pre-retirees estimated their yearly health care expenses in retirement to reach $7,000, however the actual cost stands at $10,739. To prepare for this retirement expense, clients should consider putting money away in a health savings account, which offers triple tax benefits-pre-tax contributions, tax-free growth and tax-exempt withdrawals for qualified medical expenses.
Contrary to what many experts think, clients may retire on $500,000 using a 4% withdrawal rule if they allocate the funds in a mixed bag of high-yielding investments, according to this article in Kiplinger. These investment options include larger companies, small-cap stocks, real estate and bonds. Municipal bonds are also a great option because of the tax-free yields, but these bonds should be held outside tax-advantaged accounts to take advantage of the tax benefits.
More than 60% of Americans polled by TD Ameritrade felt that they need to catch up on retirement saving, according to this MarketWatch article. More Gen Xers than those from other age groups are having the same sentiment, the survey found. To catch up on their retirement saving goals, Gen Xers said they are working to increase their income, reduce their non- discretionary expenses and contribute more to their 401(k)s.
Financial literacy is a problem for a wide range of clients, plus other findings unearthed in Financial Planning’s new survey.
Millennial workers are now appreciating the advantages of contributing to a Roth IRA, with many saying that they should have started saving in the account much earlier, according to this CNBC article. Data from Fidelity show that new Roth IRAs opened by millennials represent 41% of the total accounts in 2018, with 74% of their savings going to Roths. “The benefits of the Roth are that you can tap into the contributions you’ve made tax- free and penalty-free. People are finally really understanding that,” an expert with Fidelity says.
