Our daily roundup of retirement news your clients may be thinking about.
The number of retirees paying federal income taxes on a portion of their Social Security benefits increased to more than 50% from just 10% when the law taxing the benefits was enacted in 1983, according to this opinion column from MarketWatch. The increase can be attributed to lawmakers' failure to index the taxation on inflation, explains the writer. "We’re punishing people who saved for retirement. That isn’t fair, and it isn’t smart."
A 35-year-old client who has no retirement saving may continue focusing on her credit card debt, but should consider contributing to a retirement plan to get the employer's match, according to this Q&A article from the Washington Post. Once the debt is fully paid, she can create an emergency fund worth three months of expenses using the amount she were paying on the credit card and continue saving once she has emergency fund. "For this period of time, pay attention to where money goes so you have a better handle on what you need when you can no longer work.”
A study by researchers at Columbia Business School's Chazen Institute has found that clients increase the odds of sticking to their savings targets by joining a group that will support their goals, according to this article from CNBC. Automating retirement plan contributions would not be not enough to push people to hit their savings goals, the study found. Joining a savings support group helps clients keep savings at the top of their minds and make it a priority. Or even setting up a periodic text message as a reminder and even a gauge on how they’re saving against a goal also can help. "Just talking about it helps," says a professor at Columbia Business School.
Retirement savers will be better off contributing the maximum amount to their IRAs this year, according to this article on personal finance website Motley Fool. Contributions to traditional IRAs are tax-deductible, while a Roth IRA is funded with aftertax dollars but offers tax-free distributions in retirement. Aside from these tax benefits, an IRA offers tax-deferred compounded growth on the savings over the long term, making the account a great savings vehicle to build the nest egg.
