Our daily roundup of retirement news your clients may be thinking about.

How to defuse a 401(k) bomb

Clients should be wary of including a target-date fund in their 401(k) plan since such an investment poses a greater risk than estimated, according to this article on Forbes. An expert says that 401(k) participants should determine the TDFs with the broadest diversification at the long dates to avoid the risk. They are also advised to know those that pose the least risk and charge reasonable fees and all-inclusive costs. -- Forbes

Why clients shouldn’t convert all of their IRA savings to a Roth

Converting a traditional IRA to a Roth account makes sense if the existing tax rates will be lower than the rates that will apply to future distributions, according to this article on MarketWatch. The conversion can be spread out over a number of years instead of doing it all at once to minimize the effective rate, a strategy supported by available calculators. Those who are looking at a Roth conversion need to understand that such a move may not benefit their beneficiaries if their loved ones are in low tax bracket. – MarketWatch

When retirement savings are unsafe

The financial services industry is opposed to a proposal by the Department of Labor that subjects financial advisers to fiduciary standards when providing guidance to retirement investors, writes Teresa Tritch of The New York Times. While opponents argue that the proposed rule would have adverse effects on clients and the industry, Tritch writes, "I have faith that the financial industry can figure out how to make money from retirement savers with relatively small balances, even if it has to put those clients' interests first."– The New York Times

Your clients may have already spent their inheritance

A recent survey by HSBC finds that 51% of respondents expect to receive an inheritance from older members of their families, with two-thirds of them saying the windfall could shore up their retirement savings, according to this article on Time Money. However, clients who expect to inherit some assets need to know that they may have probably spent the inheritance as their older loved ones give them gifts. They are advised to exclude their expected inheritance when developing a retirement plan. – Time Money

Why higher interest rates could hurt retirees

Although low interest rates would mean small earnings for retirement investors, high interest rates come with inflation that could hurt retirees' finances, according to this article in U.S. News & World Report. Since most retirees out of the labor force depend on a fixed income and have no income-producing assets, a low inflation environment won't affect them much. While a rising inflation boosts the home value, most retirees are more concerned about a suitable place to stay than an increase in home value. Since most retirees also don't have much debt, the favorable impact of high inflation on debt won't matter to them. – Yahoo Finance

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