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When saving for retirement is actually harmful

Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about.

When saving for retirement is actually harmful
Saving for retirement can be a poor financial move to make if clients have not built an emergency fund, according to this article from Motley Fool. That's because savings earmarked for emergencies will prevent a major financial crisis if clients are hit with an unexpected expense. Clients are also better off paying off their debt than saving in a retirement account, especially if the debt charges a higher interest rate than the returns they get from their investments.

Muni bonds are a good alternative to annuities and other fixed-income vehicles for generating tax-free income, an expert says.

How to make the most of clients’ 401(k)
Clients participating in 401(k)s are advised to ensure they don't miss out on their employer's match and contribute regularly to make the most of their retirement plan, according to this CNBC article. They should also avoid tapping into their 401(k) savings and opt for low-cost investment options to enhance their returns. “Anything you pay to fees, no matter how small, eats into your returns because that fee is money that wasn’t invested,” an expert says.

Clients may need to save only half as much for retirement
Retirement savers should be mindful of the investment fees they pay, as even the smallest difference could reduce their overall returns, according to a Forbes contributor. For example, clients investing $100,000 in index funds with a 0.02% fee could end up with $2.2 million over a 40-year period with an 8% return, the contributor explains, adding that the return could drop to $1.6 million if the fee increases to 0.75%. "The more you spend, the less you get. And the harder it becomes to reach the level of wealth to which you aspire.”

Those leaving the workforce before 65 need more cost-effective places to live.
September 9

5 timeless financial lessons clients' children need
Saving for retirement as early as possible is one lesson parents should teach their children, an expert in Kiplinger writes. That way, they can give their savings more time to grow through compounding. "A little can become a lot when they start early and save over time. Especially with tax-deferred qualified accounts, such as IRAs and 401(k)s,” the expert explains. “For example, if they were to save $55 per month in a retirement account, they could potentially accumulate $16,267 over a 10-year period.”

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