Our daily roundup of retirement news your clients may be thinking about.
Many seniors fail to make the most of Medicare, as they don't understand how the program works, and they make the wrong decisions when choosing the coverage and timing their enrollment, according to this article in USA Today. "People are used to employer health insurance and are surprised when they need to make all these complicated decisions for themselves when they move to Medicare. There often is no one to help them," says the expert. "Medicare is so needlessly complicated that people often are paralyzed, cannot make a decision and thus do nothing." One mistake people make is not switching their Medicare plans during the annual open enrollment period, which runs from Oct. 15 through Dec. 7 each year. Research shows that millions of people could find better coverage at lower cost if they took advantage of this "terrific do over” opportunity, an expert said.
To minimize the tax bite on their savings and maximize after-tax income in retirement, clients may want to use a portion of their traditional IRA to buy a Qualifying Longevity Annuity Contract, according to this article on Forbes. They may also consider purchasing fixed and variable deferred annuities and investing in stocks, as dividends are taxed at a lower rate or not taxed depending on their tax bracket. Another option is to tap their home equity by applying for a reverse mortgage for tax-free income, or home equity line of credit with a tax-deductible interest.
Retirement savers may want to consider a dollar-cost averaging strategy, which requires clients with a fixed amount of funds to follow a certain schedule for investing the money, according to this article on Motley Fool. "I believe in dollar-cost averaging, rather than just waiting to have a huge lump sum and dumping it in, because what if then the market falls two weeks after that?" says an expert. "You've basically treated your entire savings as that one investment, rather than waiting until right after or right before and splitting it in half."
401(k) participants who want to manage their own investments may want to use their employer's brokerage window, which allow employees to choose their investments from a broader menu of individual stocks and mutual funds, according to this article on CNBC. More employers are offering brokerage window to their workers. "About 15 to 20% of our overall book of plans uses these, but 45 to 50% of the very large firms offer them," says an expert with Fidelity. "The large plans have a level of sophistication from an administrative standpoint. They have educational programs and oversight that allows them to take that responsibility on."