Our daily roundup of retirement news your clients may be thinking about.
Parents don’t regret this decision, but maybe they should
Many parents are putting their retirement at risk by cosigning their children's college loans, according to this article on MarketWatch. A survey found that 27% of parents who cosigned end up paying off the debt with their retirement savings. To avoid making the mistake, clients should thoroughly discuss the loan with their children and consider all available options, such as paying the monthly payments while their children are still job-hunting.
Investors: Don't let FOMO put your retirement at risk
The fear of missing out should not drive investors, particularly pre-retirees, to make hasty changes to their portfolio given the shifting market realities, writes an investment advisor on Kiplinger. They should consider making an adjustment only when there is a change in their time horizon, they need to pay off a big debt or a parent or spouse dies, writes the expert. "Just keep in mind that the closer you get to retirement, the more crucial it becomes to stay the course with your investments."
More employers are offering Roth 401(k)s; here's why you should save in one
More workers are gaining access to a Roth 401(k), and clients should take advantage of it if their employer offers such an option, according to this article on personal finance website Motley Fool. A Roth 401(k) has high annual contribution limits and offers greater flexibility. Unlike withdrawals from a traditional 401(k), Roth 401(k) distributions are tax-free, enabling retirees to boost their after-tax income.
Don't let pro rata rules trip up your retirement plan
Retirement savers should know the pro rata rules when planning to do IRA conversions or weighing their distribution options from their retirement plans, writes Morningstar's Christine Benz. "Gaining a working knowledge of the 'pro rata' rules and the various ways in which they affect you can help you avoid costly errors while maximizing your take-home returns," writes the expert. "The pro rata rule comes into play if the investor has a combination of traditional IRA assets in both tax categories: never-been-taxed money and already-been-taxed money."