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The next big question clients must answer after deciding to retire

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

The next big question clients need to answer after they decide to retire
Clients nearing retirement will have to decide where to spend their retirement after leaving the labor force for good, according to this CNBC article. Relocating and downsizing can be a great move for retirees, as this can significantly cut their discretionary spending. A health crisis could also force seniors who opted to stay put to leave their home unexpectedly. “We recommend that people do it long before they need to do it, not doing it reactively,” an expert says.

Retirees are advised to tap into their Roth accounts last to minimize hefty tax bills associated with 401(k) distributions.

5 retirement planning blind spots
Market risk, inflation and the cost of health care and long-term care are among the trouble spots that seniors should address before tapping their investment portfolio for retirement income, writes Morningstar’s Christine Benz. Pre-retirees should also account for the tax consequences before taking withdrawals from their retirement portfolio. “Those levies can take a bite out of your take-home return,” she says.

Why paying off student loans a priority over retirement
Clients should continue paying off their student loans while saving for retirement, even if the interest rate is low, according to this article from The Washington Post. That’s because clients tend to spend the money that should have been used to pay the debt instead of investing it. Clients should also reduce spending to sock away more money in a tax-advantaged retirement account. “Increasing your contribution rate, even by one percent, can make a big difference in your long-term retirement savings,” an expert from Fidelity says.

The ETFs that bested the strategy “offer exposure to extremely narrow and volatile segments of the market,” an expert says.
June 5

What clients should know before contributing to their retirement account
Although retirement saving should be a priority, clients should also consider building an emergency fund to cover medical expenses, home repairs and other unexpected costs, according to this Motley Fool article. They should also avoid dipping into their traditional retirement accounts before the age of 59 to avoid a tax bill and penalty. When saving for retirement, clients should account for the tax treatment of the savings vehicle to maximize the returns. For example, contributing to a tax-deferred account is a better option for workers who expect to be in a lower tax bracket in retirement.

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