Our daily roundup of retirement news your clients may be thinking about.
Buying immediate annuities early before retirement may not be a good strategy for people who want to have a steady income stream through their golden years, according to financial planners. This is because the payouts will not account for future inflation. Today, $2,000 a month seems reasonable but 40 years from now thats going to be three cups of coffee and a donut, says Craig Lemoine of The American College of Financial Services. The Wall Street Journal
Workers have until December 31 to contribute to their 401(k), 403(b) and other employer-sponsored retirement plans, according to this article on Kiplinger. They can make their contributions through payroll deduction and may earmark their yearly bonuses to their accounts. Those with IRAs can make their contributions until April 15. Kiplinger
The Social Security tax wage limit is expected to increase to $118,500 in 2015, with the maximum tax amount subsequently rising to $7,347, according to an article in Time Money. The cost-of-living adjustments will boost Social Security benefits by 1.7% next year, while workers are required to receive $1,220 in earnings to get a coverage credit. Workers who retire at full retirement age will get as much as $2,663, with retirees to get $1,328 in monthly benefits on average. Beneficiaries under FRA need to earn $15,720 or below to avoid forfeiting their benefits. Time Money
Buying annuity products is a move that will ensure seniors won't outlive their retirement savings, according to this article on U.S. News & World Report. A classic annuity is like buying a pension as clients start getting payments after making a lump sum payment, while a deferred annuity allow them to receive benefits at a predetermined date. Annuities should not be considered a type of investment as these products guarantee an income and involve very minimal risk, says Michael Guillemette of the University of Missouri's Department of Personal Financial Planning. Yahoo Finance
Most financial services firms tell workers to roll over their 401(k) assets into a Roth when leaving their jobs, an advice that may not be beneficial to them, says John Turner, an economist who heads the Washington D.C.-based Pension Policy Center. This is because clients will gain more if they keep their money in the federal government's Thrift Savings Plan, which costs much less than a Roth, Turner says. Also, while TSP offerings are diversified, they are limited to 10 index funds, he adds. -MarketWatch