The little-discussed downsides of retirement

Retirement dependency chart 0918
Register now

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

The downsides of retirement that nobody talks about
Clients should identify the possible downsides in retirement and plan on how to avoid them, according to this article in Yahoo Finance. One of these snags is taxation on their retirement income, which can hurt their cash flow. To minimize income taxes in retirement, clients should consider creating sources of tax-free income, such as Roth 401(k), Roth IRA and permanent life insurance coverage.

Can clients have a 401(k) and an IRA?
Employees who are contributing to 401(k) plans can also save in traditional IRAs, but their IRA contributions will not be tax deductible if their income exceeds a certain threshold, according to this article in NerdWallet. Participants in 401(k)s can also contribute to Roth IRAs if they earn below the income limits set for Roth accounts. To make the most of these savings vehicles, clients should make enough 401(k) contributions to qualify for their employer's full match and save the rest of their retirement money in traditional IRAs to reduce their taxable income. Those in a lower tax bracket may opt to direct the funds to Roth IRAs to boost their after-tax income in retirement.

A big question in retirement planning: How long will I live?
Although people cannot predict their own lifespan retirement, there are online tools and services that clients can use to have a good estimate of their longevity and plan for retirement, according to this article in The Wall Street Journal. “No one can predict definitively how long someone is going to live,” says an expert. “But we can say, ‘For someone your age and gender, with your level of income and education, your body-mass index and sleep and exercise patterns, this is what science tells us you are likely to experience.’”

Retiring this year? Here's what clients need to do first
There are a few things seniors should do before they retire later this year, according to this article in Forbes. Pre-retirees should maximize their contributions to 401(k)s and other tax-favored retirement accounts, review Social Security numbers and Medicare changes and create estate plans. They should consider converting some of their traditional assets into Roths to boost their after-tax income in retirement.

For reprint and licensing requests for this article, click here.
401(k) Retirement planning Retirement income
MORE FROM FINANCIAL PLANNING