Where will younger clients find retirement income?
Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about.
Where will the youth find retirement income?
Some 63% of younger Americans polled by the Longevity Project and Morning Consult believe that they will live longer than their parents, with 70% of Gen Z members saying they will have a longer lifespan than their elders, according to this article in CNBC. The survey also found that 48% of younger Americans feel they are not saving enough to secure their retirement, while 50% think they are not ready to plan for their retirement. Social Security is expected to be the main source of retirement income across all generations. “While 83% of baby boomers expect to have some income from Social Security, that drops to 64% for Generation X,” according to the article. “Meanwhile, just 42% of millennials and 38% of Gen Z plan to depend on those benefits.”
Raiding 401(K)s can be a divorce disaster
Couples who are getting a divorce are advised to avoid tapping their 401(k)s and IRAs in order to cover their legal bills and increasing expenses, a CFP in Kiplinger writes. "Direct withdrawals from a 401(k) or IRA can be financially disastrous," according to the CFP. "Retirement savings are meant to remain in place until you reach retirement age, and the government has put in a tax system that penalizes those who raid their accounts early."
A lazy saving approach may be best
Workers may be better off setting automatic contributions to retirement accounts than taking a hands-on approach to saving, according to this article in Motley Fool. That's because putting contributions on autopilot will enable them to save on a regular basis. It will also make it easier for clients to include retirement savings in their budget.
Building a tax-free income in retirement
Clients who want to improve their retirement security may consider creating a source of tax-free income, according to this article in Forbes. This means taking advantage of the Roth feature of their 401(k)s or contributing to a Roth IRA. Another instrument to build tax-free retirement income is to buy life insurance, which offers various benefits, including tax deferral, ready access to cash and long-term care coverage.
The stock market will not support clients in retirement
Valuation models show that investors cannot depend on the stock market to generate the needed returns to secure their retirement, writes a MarketWatch contributor. "You therefore might want to consider adjusting your retirement financial plan to include lower projected equity returns," he concludes. "If you’re wrong, you’ll be pleasantly surprised, and that’s a far better outcome than being too optimistic and discovering that you have run out of money."