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Retiree tax tip: Tally taxes on Social Security

Our daily roundup of retirement news your clients may be thinking about.

Retiree tax tip: Tally taxes on Social Security
Retirees will owe taxes on up to 85% of their Social Security benefits if their adjusted gross income plus nontaxable interest and 50% of their benefits exceed a certain threshold, according to this article from Kiplinger. For example, they will face taxes on as much as 50% of their benefits if their combined income is between $25,000 and $34,000. Joint filers are subject to a higher income limits.

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More than 4 out of 10 workers aren't taking this key step to keep 401(k) fees in check
A survey by Schwab Retirement Plan Services has found that some 40% of 401(k) participants failed to review their fee disclosure documents, according to this article on CNBC. "The biggest thing to look for is the fund fees," says a certified financial planner. "If it says you're paying 1% for a target-date fund, you have to ask yourself, 'What's going on here?' It's diversified, but you're giving away so much return in those costs."

Beware conventional wisdom when planning for retirement
Clients are advised to rethink established retirement strategies before including them in their retirement plan, writes an expert for MarketWatch. These conventional strategies include relying on the 4% withdrawal rule and using a break-even analysis to determine the age to start claiming Social Security, writes the expert. "These well-recognized strategies may have problems."

U.S. lags many developed countries on retirement security
The 2018 Natixis Global Retirement Index shows that the U.S. ranks 16th in the list of 25 developed nations in terms of retirement security, according to this article on CBS Moneywatch. The U.S. improved its ranking this year, beating out the U.K., France and Japan. The U.S. "has the highest score for the health expenditure per capita indicator yet is in danger of being in the bottom ten for life expectancy," states the report.

6 factors to consider before cashing out a 401(k)
This article from U.S. News & World Report identifies six considerations to make before cashing out their 401(k) assets. Just one of these considerations is the net amount they will keep after cashing out the assets, as it will be taxed as ordinary income. “It is not uncommon for 50% or more of the funds to get vaporized with taxes and penalties,” says an expert.

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