Our daily roundup of retirement news your clients may be thinking about.
In retirement planning, clients need to prepare for health challenges and longevity, which present a big risk to their future financial stability, according to an article in MarketWatch. Unforeseen expenses, such as support of elderly parents, and economic trends that include inflation and taxes can also pose a serious financial threat for retirees. Other retirement hazards include the 4% withdrawal rate solution, lack of reserves, and having no retirement plan at all. MarketWatch
Investors who consider investing in hedge funds need to know that the term's meaning has evolved from being a distinct asset class into more of a compensation scheme for the people who manage them, according to this article in The New York Times. Investing in such funds command hefty fees, and the idea of a fund of funds --or a fund consisting of other hedge funds-- can be difficult for investors to understand. Investors should learn a lesson from the decision by California's pension fund to drop hedge fund investments, and they must ask the right questions about this investment type. New York Times
Exchange-traded funds are a very good investment option for 401(k) participants because of low cost, flexibility and investor engagement, says David Blanchett, Morningstar's head of retirement research. Although retirement investors can include ETFs in their portfolios, some of them need help to create a performing portfolio of ETFs and rebalance it effectively, the article says. Consequently, major brokerages are working on a business model in an effort to provide the support that these investors will need when including ETFs in their portfolios. -- Forbes
Although 401(k) plans can help retirement savers build a sizeable nest egg, the benefits that these plans provide can be reduced by poor plan design, hefty fees, expensive investments, and a lack of employer match contributions, according to an article in U.S. News & World Report. In order to make the most of 401(k) plans, clients need to avoid possible drawbacks, such as staying at a low savings rate, sticking with the default investment, and not saving while waiting for the employer to allow them to participate in the plan. Workers should also avoid resigning before they are vested in the plan, as well as cashing out when they decide to change jobs. Yahoo Finance
Retirement investors can work towards accumulating $1 million in their nest egg if they know the right strategies, according to this article on Motley Fool. Saving a small amount of cash can go along way because of compounding, while working a little longer will enable people to gain more extra money to save. They may also defer their retirement date to boost their earnings from their Roth IRAs and 401(k) plans. Motley Fool