Our daily roundup of retirement news your clients may be thinking about.
A 1035 Exchange is a good option for clients who wish to replace their old annuity with a new policy that offers a better package, according to this article on MarketWatch. Those who contemplate using a 1035 Exchange for this purpose need to ensure they are already past their surrender period and they have reviewed the existing policy and understood its offerings. Also they need to make sure they also understand the death benefit if it is crucial for them, the cash value of the existing annuity has risen considerably because of market gains and gauge their prospects for the stock market if fixed, indexed and variable annuities interest them. MarketWatch
Small business workers in California, Illinois, Oregon and Washington who have no access to employer-sponsored 401(k) plan can save for retirement through state-sponsored automatic individual retirement account plans, according to this article on Time Money. Other states also are considering the same scheme to help employees of companies offering no 401(k) plans build their nest egg. The Obama administration supports the states' initiative and is working to clear issues about whether the Employee Retirement Income Security Act applies to these plans because of their payroll deduction feature. Time Money
For clients who want to develop their own retirement income plan, the first thing to do is to get a realistic estimate of income they will need to cover their living costs in retirement, according to this article on CNNMoney. The next step is to determine the portion of that income that will come from guaranteed sources of income such as Social Security and pension. After knowing how much of the income will be guaranteed, clients can now proceed to developing a withdrawal strategy to tap their nest egg. CNNMoney
A report from Fidelity Investments shows that average IRA account balance rose to a record high of $96,300 while the 401(k) balance jumped to $91,100 on average in the second quarter, according to this article on CBS Moneywatch. However, 401(k) loan balance soared to all-time high of $9,720, with over 10% of participants taking the loan in the past 12 months, the report says. 401(k) participants are advised to avoid borrowing from the plan for discretionary spending and only take the loan if they desperately need money. CBS MoneyWatch
The "file-and-suspend" strategy is a good option for married couples to maximize their Social Security benefits, according to this article on CNBC. The strategy enables seniors to file for their retirement benefit when they reach full retirement age and then defer receiving the benefit until they turn 70, with their spouses and dependents allowed to collect benefits. Those who use the strategy earn delayed retirement credits and have their benefits increased by 8% per year. "It's not as simple as both spouses maxing out their Social Security by waiting to claim them at age 70. Couples may be missing out on benefits for lack of knowing," an expert says. CNBC