Our daily roundup of retirement news your clients may be thinking about.
4 tax-friendly ways to pay for long-term-care insurance
Clients are advised to hold a health savings account, as it offers tax-free withdrawals that they can use to cover a portion of their long-term-care insurance premiums, according to this article on Kiplinger. They can also enhance their tax savings on long-term-care insurance by deducting the premiums on their tax returns as a medical expense. Another strategy is to make a tax-free fund transfer from an annuity or permanent life insurance coverage to pay the premiums for a traditional long-term-care insurance policy.
Is Social Security going broke?
Contrary to what many people think, future retirees can expect to receive Social Security benefits despite the program's current solvency issues, but the benefits may be reduced, according to this article on Money. Although a report from the Board of the Social Security Trustees indicates that the program will deplete its $2.79 trillion by 2035, future retirees would still receive 79% of their benefits if Congress does not approve legislation to address the program's financial woes.
Can 401(k) lawsuits help?
Lawsuits being filed against errant 401(k) plans are compelling many plans to reduce investment costs, enhancing participants' overall returns and retirement prospects, according to this article on Morningstar. However, taking action to lower the fees could have unintended consequences. For example, plan sponsors may replace institutional classes with privately registered collective investment trusts, which do not provide the legal protection that mutual funds have under the Investment Company Act of 1940. Increasing passive options in the large plans to reduce costs may also result in herding.
Health care will cost you $260,000 in retirement
Healthcare costs in retirement could amount to $260,000 for 65-year-old couples who are retiring this year, according to a report from Fidelity Investments. The estimate is applicable to couples carrying traditional Medicare insurance, and it includes premiums, co-payments, deductibles, and out-of-pocket drug expenses. These couples should have an extra $130,000 to cover long-term care expenses in their golden years, adds the report.
Don't let boomerang kids sabotage your retirement
Clients who have boomerang children in their home can avoid the potential effects on their retirement by creating clear guidelines from the start and writing out an agreement, according to this article on U.S. News & World Report. They should also consider how boomerang children can affect their retirement timeline, avoid underestimating the increase in household bills, stop covering all of their children's personal expenses, and teach these children how to budget. Parents are advised to stick to their retirement goals, avoid reducing their savings, and oblige their children to do household tasks, such as mowing the lawn or cleaning the house, to help reduce costs.