Our daily roundup of retirement news your clients may be thinking about.
Data from T. Rowe Price show that about 67% of 401(k) plans offer a Roth savings feature, according to this article on Motley Fool. With the Roth feature, no upfront tax break is given on the contributions but distributions will be tax-free in retirement. 401(k) participants who are given the Roth option should take advantage of this feature to reduce their tax liability and make their retirement portfolio more flexible tax-wise by the time they start drawing income from the plan.
Fifty-six percent of Americans polled by the Transamerica Center for Retirement Studies claimed that they have not fully recouped losses from the Great Recession, according to this article on CNBC. Many of those who were hit by the downturn tapped their nest eggs to make ends meet, says an expert. "Any disruptions to that will have an impact on the size of our nest eggs when we retire.”
Workers can expect changes in their 401(k) plans if their employers enter into a corporate merger or acquisition, writes an expert on Kiplinger. The selling company keeps the responsibility for the 401(k) plan if the acquisition is an asset sale, while the plan could be terminated or merged with the other firm's plan if the acquisition is a stock purchase, the expert explains. "If your employer is part of a merger or acquisition, review all of your benefit plan options. Be aware if you are a participant in a merged plan, the company match or profit-sharing component may change."
Morningstar's Christine Benz says that retirement savers will be better off having an investment policy statement for their investment program or retirement decumulation program. The statement will allow clients to articulate their investment strategy and instill discipline in their portfolio, explains the expert. "The final benefit that I see to having these policy statements is simply to give your loved ones the ability to get a quick and easy glance at what it is you are doing in terms of how you are approaching your investment program or how you are approaching your retirement plan."
One of the mistakes that retiring entrepreneurs make when selling their small businesses is failing to take into account how the income taxes of additional assets will be distributed, writes an expert on Crain's Cleveland Business. "For example, if a small business has a "key person" insurance policy or a buy/sell agreement utilizing life insurance paid by the company, what will happen after a sale?" writes the expert. "Depending upon how the policy is titled, there may be income tax consequences to distributing the value of the policy to the owner."
