Our daily roundup of retirement news your clients may be thinking about.
U.S. nudges states to help private-sector workers save for retirement
The federal government has finalized the rules that will guide the states in establishing their own retirement savings plans with automatic features for their private-sector employees, according to this article on The Wall Street Journal. The new plans are part of the administration’s push to get people to save more for retirement. “We literally have tens of millions of people, roughly a third of American workers, working on a job where they don’t have a pension, where they don’t have any retirement vehicle,” says Labor Secretary Thomas Perez. “What we need to do is to figure out different ways to promote saving."
What the 'new retirement' looks like
Baby boomers are redefining the concept of retirement, as many seniors opt to continue working past their retirement age, and some have no plans of retiring, according to an article on Fox Business. "Unlike their parents’ generation, boomers are planning to work longer and fully retire at an older age — and they are proving that the balance of working and retirement is not an all-or-nothing proposition," says Catherine Collinson of the Transamerica Center for Retirement Studies. "For boomers who may be falling behind on their savings, the secrets to catching up are grounded in common sense ... working longer and delaying full retirement, saving more, spending less, planning well and investing wisely."
Health care costs are unpredictable, clients need to plan accordingly
Because of the unpredictability of health care costs, clients have all the more reason to include these expenses in their retirement plan, according to this article on The Street. Fidelity estimates that health care costs in retirement could amount to $245,000, and retirees need to add $130,000 for long-term care insurance. "We hope this number is a clarion call for people to be aware of the financial risk," says an expert. "For many people, health care will be biggest financial obligation to take into retirement. Being aware of those obligations is critical."
How the switch to 401(k)s is exacerbating the wealth gap
A study has found that the income gap between the rich and poor has been increasing for the last 40 years, and this trend can be linked to the shift from traditional pensions to 401(k) plans, according to an article in Money. The wealth gap will continue to increase among Americans aged 65 and above, and “a disparity in retirement savings could exacerbate inequality during retirement, a time in life when income inequality has historically been less prominent,” the researchers say.