Our daily roundup of retirement news your clients may be thinking about.
High-deductible insurance deters doctor visits
Although workers enrolled in a high-deductible health plan can open a tax-advantaged health savings account, they are less likely to visit their physicians, with those in lower income groups making fewer doctor visits, according to this article on CNBC. This poses a concern, as it indicates that people are limiting the health care services that they receive, says an expert. Clients are advised to weigh their options before signing up for a high-deductible health plan. They should not reduce their 401(k) contributions so they can save in an HSA, and ensure that they contribute enough to get their employer match contributions.
Boomer retirement plans: Good, bad and ugly
A survey has found that more baby boomers intend to continue working past their retirement age for health and financial reasons, but many of them may be unable to do so because of deteriorating health or lack of job opportunities, according to this article on CBS Moneywatch. Only 25% of the respondents claimed that they have a backup plan in the event they cannot work longer as planned, the survey found. Twenty-six percent of the respondents also said that they have less than $5,000 for home improvement costs, medical bills, and other major financial hurdles.
The single-worst retirement move
People should avoid cashing out their retirement plans even if they are allowed to do so, as this could hurt their chances of securing a comfortable life in their golden years, according to this article on Forbes. Early distributions are subject to tax and a 10% penalty, and they reduce the principal. By withdrawing the funds, clients miss out on the power of compounding, which allows investors to grow their savings and help improve their retirement prospects.
Pension plan assets fall as payouts rise
A study by Willis Towers Watson has found that the large lump-sum payouts made by corporate pension plans led to a 3.4% decrease in corporate pensions' total assets following a 3.4% increase in 2015, according to this article on The Wall Street Journal. The rising popularity of lump-sum payouts can be attributed to the regulations that enable companies to compute the discounted present value of workers' future pension benefits based on corporate-bond interest rates. “The value of those lump sums became more reasonably priced when those rates moved from Treasuries to corporates,” says an expert with Aon Hewitt
Can a 65-Year-old business owner hold off on Medicare?
Small business owners who obtained a group health coverage for less than 20 employees should consult with the health-plan provider to determine if their workers who reach the age of 65 are required to sign up for Medicare, according to this Q&A article on Money. In a group plan with such a requirement, Medicare will be the primary payer while the plan will serve as the secondary payer for these employees. Workers aged 65 and above who fail to enroll in Medicare mean they have no primary health coverage.