Tax law's impact on your client's divorce
Our daily roundup of retirement news your clients may be thinking about.
How the new law might affect your client’s divorce
Advisors should consider educating couples getting a divorce ahead of retirement on the tax implications of their decisions when dividing conjugal assets, an expert for Kiplinger writes. Higher-income spouses who will be responsible for alimony payments are scrambling to reach an agreement by Dec. 31, as tax deductions for these payments will no longer be available beginning next year, thanks to the new law. However, in some states like California, it might be too late, as divorce won't be finalized until at least six months after the applications has been filed.
IRA or 401(k)? Where should your client’s money go first?
Clients should consider contributing enough to their 401(k) plans to get their employer's match before making contributions to an IRA, according an article on Motley Fool. If there is no employer match, workers can contribute equal amounts to their 401(k) and IRA. If the company only offers a traditional 401(k), and if they think that they are in a lower tax bracket now than they would be in retirement, contributing to a Roth IRA might be the best option.
How to help clients invest for retirement with special needs children
Clients who have special needs children will need to strike a balance between investing for retirement and taking care of their child’s future, according to U.S. News & World Report. These clients should start planning for both as soon as they can, a CFP says. "You have directions on how to get there,” according to the expert. “When you have a special needs child within your family, it's very important, as early as possible, to face the fact that there are some differences, and that you've got to create a plan."
6 ways to cut retirement tax surprises
Advisors could recommend their client diversify their savings by using tax-deferred, tax-free and taxable accounts to minimize tax surprises and enhance returns in retirement, according to CNBC. They should also consider advising their client to contribute to a Roth account and an HSA, as well as create a retirement income strategy. Retirees who want to minimize their required minimum distribution should consider rolling over some of their retirement assets to their current workplace plan and Roth IRAs. Donating directly to a charity from an IRA through a qualified charitable distribution is another strategy to boost tax savings.