Our daily roundup of retirement news your clients may be thinking about.
Although withdrawal sequencing is recommended when developing a retirement withdrawal strategy, retirees need to take a more flexible view since their tax situation varies from year to year, writes Christine Benz, director of personal finance of Morningstar. It is recommended that they keep their holdings in taxable, tax deferred and Roth accounts to make their portfolio tax-diversified, Benz writes. Know some situations when retirees can tweak withdrawal sequencing strategy and adopt other options. –Morningstar
Retirees can use the IRS website to determine the required minimum distribution from their IRA, according to Forbes. To determine the RMD amount, retirees have to divide their IRA's prior year-end balance by the life expectancy factor based on the IRS Uniform Table. For example, clients who turned 70½ this January can expect an RMD amounting to about $3,650 if their IRA balance stood at $100,000 as of December 31 and the life expectancy factor is 27.4 based on the IRS table. –Forbes
Retirees are advised to determine whether the standard deduction or itemized deduction will enable them to maximize their tax savings when filing a tax return for 2015, according to Kiplinger. Itemizing deductions will be a better option for retirees if their real estate taxes, state and local income taxes and charitable donations increased. Those who opt for itemized deduction are advised to take advantage of all the tax breaks they can qualify to reduce their tax bill. –Kiplinger
Retirees should consider their options before adopting the 4% retirement rule because it may put them at risk of outliving their nest egg, according to The Motley Fool. The rule may not work for them because their fixed income would be lower as a result of existing interest rates and they would have a longer life span. Subsequently, they need to have a bigger amount of retirement savings to cover their long-term care needs, which are expected to increase in their advance years. –The Motley Fool
IRA investors are prohibited from acquiring a house with their IRA money if they will use the property as their personal residence, according to MarketWatch. If they intend to purchase the property for investment purposes, they should consider tapping other financial resources before finalizing their decision. They also need to know that getting financing would be difficult since they can't use traditional mortgage while the IRA custodian will have to transact directly with the real estate owner. –MarketWatch