Our daily roundup of retirement news your clients may be thinking about.
Do I owe taxes on a windfall from a retirement plan?
Clients who inherit from their parents' life insurance policy will not incur taxes on the payout but inheritance from a 401(k) or other tax-deferred retirement accounts will be subject to income taxes, according to this Q&A article. While beneficiaries of tax-deferred retirement plans can claim a lump sum, they can also spread the distributions over a certain period of time by opening an inherited IRA and subsequently moving the assets into this new account if they are allowed. They are advised to seek advice from a tax expert to comply with the rules. --CNN Money
Offsetting taxes from an inherited 401(k)
Although clients who inherit a 401(k) fortune from a parent or a relative are likely to move into a higher tax bracket, they can curb their tax obligations if they use the inheritance to make catch-up contributions to their employer-sponsored retirement plans and boost their nest eggs, according to an article in The Wall Street Journal. The tax-deferred contributions will cancel out their additional annual income as a result of the inheritance and will cut the taxes they are expected to pay, a financial adviser says. --Wall Street Journal
5 high-risk behaviors harmful to your retirement
Investors should reconsider their retirement plans if they exhibit behavior that puts their investments at risk, according to MarketWatch. Selling all investments in the portfolio for fear of a market crash and constantly monitoring balances are among the habits that can be risky for investments. Clients may also put their investments at risk if they never check their statements, don't know the investment fees and other costs, and buy funds without having background information of the products. --MarketWatch
What's the theme song for your retirement years?
Working retirees can be classified into four types based on a report by Merrill Lynch/Bank of America and Age Wave. The "driven achievers," who are fulfilled and successful with their careers, and "caring contributors," who are happy with their jobs and actively involved in charitable work, are groups of working seniors who consider themselves financially secure. The two other groups, the "life balancers" and "earnest earners" are composed of retirees who need to work to pay bills or augment their retirement income. --CBS Moneywatch
The right and wrong questions to ask about retirement
Many clients pose the wrong questions about retirement, such as whether they will have an adequate lump sum in their 401(k) plans or have chosen wrong mutual funds, according to Forbes. The most appropriate questions to ask about retirement should concern the amount of income that can be generated by their retirement savings, and clients should try to find out whether such earnings can support their lifestyle in the golden years. --Forbes
- Treasury Opens Door for New Annuity Options
- New Combo Policies Offer Long-Term Care Option
- Retirees Suffer as 401(k) Rollovers Enrich Brokers