Our daily roundup of retirement news your clients may be thinking about.
More employers are offering flexible retirement options to their older employees, according to this article on CNBC. In about 30% of large companies, seniors have the option of working part time or engaging in job sharing with co-workers, according to WorldatWork. However, this option is offered mostly as an informal arrangement, as data from Aon Hewitt show that only about 6% of major companies are offering formal phased retirement policies. A phased retirement is not appropriate for all older workers, as it could cause them to lose motivation to work, says an expert.
Clients can secure their retirement by making wise housing decisions, such as paying off their mortgage early, according to this article on Forbes. They may also want to sell their big homes and use the proceeds to buy a smaller place to minimize their housing costs in retirement. Another option that can help improve clients' retirement prospects is buying a home with a reverse mortgage, which allows them to tap into their home equity as income after they retire. Some seniors are better off moving to another country that offers lower housing costs, or sharing a home with family members to minimize the cost.
Retirement savers have the option of switching to a lower-cost annuity through a 1035 exchange, according to this article on Kiplinger. The 1035 exchange allows clients to switch to a less expensive annuity while deferring the tax liability “The annuity market has changed significantly,” says a financial advisor. “As lower-cost annuities come to the market, people who purchased annuities in the past are starting to do their homework and save a lot of money.” Before deciding whether to switch annuities, clients are advised to compare fees, investing options, surrender charges, and any guarantees and other special perks offered by their current annuities and those they are considering.
Retirement investors can contribute to their IRAs before the tax-filing season in April and include the money as part of their contributions in the prior calendar year's tax return, according to this article on MarketWatch. Those who consider converting a portion of their traditional IRA to a Roth account should include the amount on the tax return for the year in which the money leaves the traditional IRA account, not for the year the money is converted to the Roth. A Roth conversion is recommended when clients experience a drop in income and move to a lower tax bracket to reduce the impact of taxes on the converted amount.
The Social Security Administration has found that its records have misclassified as deceased many workers who are still living, according to this article on Washington Post. So far, some 90 people have been misclassified, and the mistake was discovered when the SSA was rolling out pilot projects in Virginia and two other states. “We are working to identify which records contained erroneous information," says a spokesperson for the agency. “We have instructed our employees to assist people expeditiously to remove death information from their records and to reinstate benefits as quickly as possible.”