Our daily roundup of retirement news your clients may be thinking about.
Setting aside 15% of income for retirement may not be enough to build a nest egg that is adequate to cover living and other costs in the golden years. “These days, our savings from 35 years of work have to cover us for 80 years of life,” says Laurence Siegel of the CFA Institute Research Foundation. “If you want to guarantee results, you have to plan for real returns of zero. And that means you have to save around 30%.” –Time Money
Retirement investors are advised to avoid buying a universal life insurance if there is no imminent need for such coverage. While a universal life insurance offers decent tax benefits, such as tax-deferred earnings, the cost of the coverage offsets these benefits. –Kiplinger
Pre-retirees are likely to spend an average of $267,000 on health care throughout their retirement lives, with those who are expected to retire in the future spending more, according to HealthView Services. The figure could rise to about $395,000 if dental care, vision and out-of-pocket expenses are included, the company says. The amount could be higher because of certain variables, particularly increased longevity. "How long you're going to live is probably the biggest uncertainty there is," says Paul Fronstin of the Employee Benefit Research Institute. –Yahoo Finance
Although Social Security is expected to face a solvency crisis in the foreseeable future, the program is unlikely to reduce or scrap retirement benefits altogether, writes Wade Pfau , professor at The American College and a principal of McLean Asset Management. Currently, lawmakers are looking at a number of solutions to put the program back on track to a 75-year actuarial balance, such as a continued increase in the full retirement age to 67, the use of CPI-W as basis for annual cost-of-living adjustments and an OASDI payroll tax of 12.4%, Pfau says. Other options are raising payroll tax rates or the ceiling on maximum taxable earnings. –Forbes
Retirees are advised to take the first required minimum distribution from their retirement accounts before the end of year they reach 70 1/2 even if the deadline is April 15 of the following year. Those who opt to take the first RMD the following year will also take their second RMD by the end of the same year and this could push them to a higher tax bracket. This could lead to a Medicare high-income surcharge and subject a certain portion of their Social Security benefits to income tax. –Kiplinger