Our daily roundup of retirement news your clients may be thinking about.
Federal employees who left the service last year have withdrawn nearly $10 billion from the Thrift Savings Plan although they were not required to do so, according to this article on CNNMoney. Investment fees in the Thrift Savings Plan are considerably lower compared with IRAs and other retirement accounts. This investment behavior may be attributed partly to advice that federal employees received from private financial firms and advisers, who prefer a rollover of assets from the plan to IRAs, says an executive of the agency that runs the thrift plan. - CNNMoney
Calpers, California's biggest state-led pension system, can't have the lien to claim $1.6 billion of Stockton's assets if the bankrupt city decides to stop making payments and leave the system, according to a decision of a federal bankruptcy judge. While the court didn't issue an order for Stockton to take an action on its pension plan, the judge ruled that Calpers cannot exercise its statutory powers in the event the city received federal bankruptcy protection. The New York Times
Entrepreneurs need to plan ahead if they intend to sell their small business when they retire, according to this article on Forbes. When preparing a plan, they should seek advice from tax and estate planners and upgrade their system for managing financial records. The business's management team must also be institutionalized, eliminate all risks if possible, and consult with a competent M&A advisor on how to increase the value of their business. Forbes
Investing in preferred stocks is a good option as these investment vehicles offer high distribution yields and low volatility, according to this article on MarketWatch. Such an option is also recommended especially to investors and retirees who need to fill the gap in their income or want a non-correlated asset class that has a different reaction to shifting market dynamics. It is also important that investors and retirees take pains in determining the amount of exposure that their investment portfolios can take. - MarketWatch
Pre-retirees who have acquired a home through mortgage and intend to stay when they retire may consider prepaying the principal on the mortgage, according to this article on Forbes. The strategy results in a number of benefits, such as lower expenses in retirement, bigger home equity, and housing security. However, a mortgage prepayment strategy can affect a person's financial circumstances, so it helps if clients consider their risk tolerance, expected investment returns and other factors before pursuing such a strategy. - Forbes
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