Our daily roundup of retirement news your clients may be thinking about.
Looking for the right asset allocation can be a challenge for investors since it is "an imprecise science" and clients will need to depend on market history and asset class valuations, writes Christine Benz of Morningstar. As such, clients who opt to build their own investment portfolios will be better off choosing target-date funds, Benz writes. "Looking at target-date fund holdings is like peering into what professional managers would do with your money. Once you have a sense of how different professionals would invest, you can take the parts you like and leave what you don't." --Morningstar
The withdrawals that clients take from their IRA and 401(k) plans within the year they turn 70 1/2 will be counted automatically by plan administrators toward their first required minimum distributions, according to Kiplinger. "From an IRS perspective, the first money out of the IRA and 401(k) during the year is supposed to be for their minimum required distributions," says Maura Cassidy, director of retirement products for Fidelity. While retirees need to take their first RMD by April 1, 2017 after reaching 70 1/2 this year, they will be required to take another RMD by December 31 next year.
Clients who lag behind their retirement savings target can still catch up by paying down their debt and maxing out their contributions to tax-deferred retirement accounts, according to USA Today. They also need to reduce the fees on their retirement investments and consider working longer and delaying their retirement. It will also be wise if they keep a diversified investment portfolio, avoiding an overly aggressive investing strategy that would put their savings in limited asset classes. --USA Today
Although most Americans have not saved enough to cover their cost of living and other expenses in retirement, clients can improve their retirement prospects if they act promptly to address their saving deficiency, according to The Motley Fool. For example, clients need to realize that Social Security should not be their sole income source in retirement and create other income streams, such as 401(k) plans and IRAs. Also, they need to stay fit to minimize healthcare-related costs, which will not be covered entirely by Medicare. Here are a few of the surprising stats you'll see in this article: the average net worth of a 55-64 year old is $45,447; 45% of Americans have saved nothing for retirement, including 40% of Baby Boomers; and 20% of Americans tap into their 401(k) assets early, either through a loan or withdrawal. --The Motley Fool
Clients are advised to look for a retirement planner who can determine whether they need a Roth conversion and whether a rollover is feasible, according to MarketWatch. A competent retirement planner will be able to address their pre-retirement distribution issues, determine their optimal retirement age and the best age to start collecting Social Security benefits, and find the best way to make retirement assets into income sources. Clients should look for a retirement planner who can develop a tax-efficient strategy for retirement withdrawals, identify products and strategies to overcome retirement risks and find the best location for clients to retire. --MarketWatch
- Social Security Tips for the Astute Retirement Advisor
- Long-Term Care Takes Back Seat on Client Priority List
- New Products Address Shortcomings of Long-Term Care Insurance