Data from Fidelity Investments show that an average couple aged 65 who are about to retire this year will need $285,000 to cover healthcare expenses throughout retirement, according to this article on MarketWatch. Of this amount, 42% will go to copays, coinsurance and deductible, 39% will be spent for Medicare premiums and 19% will cover prescription medications, says Fidelity Vice President Meghan Murphy. “The cost of healthcare in retirement remains top of mind for Americans. It’s one of the biggest worries that pre-retirees tell us they have.”
A Roth IRA can be a great savings vehicle for clients who want to boost their after tax income in retirement, according to this article on Yahoo Finance. Although saving in a traditional IRA offers upfront tax deduction, distributions will be subject to income taxes in retirement. A Roth IRA is funded with after tax dollars, but the distributions will not be taxed, enabling retirees to keep their taxable income low.
The Blended Retirement System is one of the federal programs that are designed to help military service personnel and veterans to build wealth and secure their golden years, according to this article on CNBC. Military service members on active duty and reservists can also use the Savings Deposit Program. Contributions to this program and interest are tax-free when made in qualified tax-exempt zone.
Workers have the option of taking a hardship withdrawal from their 401(k) plans if they have no available funds to cover emergency expenses, according to this article on CBS Moneywatch. A hardship withdrawal from 401(k) accounts is allowed only expenses such as qualified medical costs exceeding 10% of their adjusted gross income, purchase of primary home, funeral or burial expenses and home repair costs. However, clients are advised to weigh other options as they will owe income taxes on a hardship withdrawal.
