Our daily roundup of retirement news your clients may be thinking about.
Investors have an average of 25 401(k) plans to choose from for their retirement, but some financial advisors suggest that the best approach is to pick a small number of broad funds, according to this article on CNBC. Newcomers to investing especially can start a streamlined portfolio consisting of three funds that include the basic asset classes of bonds, domestic stocks and international stocks, also referred to as "total market" index funds. One benefit of having a streamlined portfolio is it will give the investor less to worry about in terms of keeping track of their investments, while also saving on investment fund fees that would eventually erode potential earnings.
Spouses who are considering or working on their divorce late in life should think long-term and take caution in making financial decisions to ensure retirement success and protect their financial future, according to Kiplinger. Prior to negotiations, spouses are advised to organize and deal with paperwork, as well as meet with a financial adviser who is also a fiduciary to organize what they want and need for the future. They should also maximize their retirement income, clarify ownership of life insurance policies and consider tax consequences, such as the resulting changes in their filing status and tax bracket.
If clients want to retire before the age of 59½ and utilize some retirement plan assets that could be subject to a 10% penalty imposed by the IRS for early withdrawals, this article in Forbes provides those future retirees with tips on how to avoid unlocking those assets without getting penalized, as well as suggestions on how to use three methods to calculate allowable withdrawals. The easiest way to avoid IRS penalties though would be to use money in one's personal accounts until the retiree passes the age of 59½ to avoid the penalty tax period for early retirement.
Investors may be expecting a growth in wealth as returns of the S&P 500 index nears double-digits for three years in a row, but their investment statements may be inaccurate and fail to account for tax rates and other factors according to CNBC. New technology can enable investment managers to provide the more accurate “total wealth return” performance report, wherein actual or estimated tax rates are considered in calculating investors’ returns. Total wealth returns also allow investors to better align incentives with wealth-building firms, as well as further motivate wealth managers to boost investors’ actual wealth. However, outdated regulations and lacking will among financial companies are hindering the delivery of total wealth returns.
