Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about.
Seniors tend to take bigger withdrawals at the early part of retirement as they adjust to their new lifestyle or spend more on travel, according to a study by J.P. Morgan Asset Management in this CNBC article. As a result, many underestimate their needs and make wrong retirement decisions. To avoid these mistakes, clients should consider their changing needs and inflation per category, minimize their equity risk as they transition to retirement and consider the tax consequences of their withdrawals, the firm says.
Compared with a taxable investment, an IRA is a better place to save and invest for retirement because of the tax benefits the account provides, a Forbes contributor writes. "Contributions [clients] make to a traditional IRA may be fully or partially deductible, depending on [their] circumstances, and generally amounts in [their] traditional IRA (including earnings and gains) are not taxed until distributed," according to the contributor. "With a taxable investment, [clients] may face short- and long-term gains taxes each year, which could reduce the amount of money [their] account gained in the year."
Clients should avoid the mistake of supporting their adult children at the expense of their own retirement, as this could lead to disastrous results, according to this article from Motley Fool. They are advised to make retirement saving a bigger priority than paying their children's education expenses and teach their offspring to be financially independent at an early age. Parents are also advised to limit the financial support they provide their adult children.
Retirees who want to generate returns while supporting their advocacies have the option of utilizing impact investments, an expert from Kiplinger writes. "Impact investments belong to a broader principles-based investment universe that also includes mutual funds focusing on companies with strong environmental, social and corporate governance (ESG) track records," the expert explains. "Rather than simply encouraging socially responsible corporate practices, however, impact investments aim to have a direct and measurable impact on society or the environment."
