Our daily roundup of retirement news your clients may be thinking about.
Mortgage debt — the new retirement time bomb
Many baby boomers are retiring while still shouldering the financial burden of mortgage debt, a trend that disappoints the experts, according to this article in The Washington Post. Carrying mortgage debt into the golden years can be risky especially when the economy and markets deteriorate. One of the problems is that it contributes to fixed expenses in retirement, which means there is less room in the budget for variable expenses, such as entertainment and travel, the article says. So what can clients do if they’re preparing for retirement and still have too much debt? The article outlines several steps, including: reducing expenses, paying off credit cards first, paying down their mortgage faster or delaying retirement or working part time to pay off their debt.
Does health insurance policy make clients eligible for health savings accounts?
Clients are eligible to open a health savings account if their health insurance policy has a deductible at least $1,300 for individual insurance or $2,600 for family coverage, according to this article on Kiplinger. Also, all covered services must be subject to the deductible under the terms, and the policy must comply with the requirements for determining out-of-pocket spending limits. --Kiplinger
Social Security Q&A: Won't maximizing benefits bankrupt Social Security?
Will Social Security claiming strategies designed to maximize an individual's benefits place a burden on the overall system? That was a question in Forbes' Q&A column about Social Security. The author said he didn't feel that trying to get the maximum benefits allowed was the same as “gaming the system." He said: “I don’t see any reason why people shouldn’t get what is theirs, what they’re legally entitled to.” --Forbes
When clients can and cannot convert 401(k) to Roth
Retirement savers can convert a 401(k) plan to a Roth 401(k) if the plan allows it explicitly and they meet certain requirements to do so, according to this article on MarketWatch. The main benefit that workers get for doing the conversion is the lower taxes they will pay than the taxes for taking distributions from the traditional 401(k) after they retire. Conversion is also a good option if clients expect to be in a higher tax bracket by the time they retire. --MarketWatch
A new tool for retirement income
Having a qualified longevity annuity contract in a 401(k) or IRA offers several benefits but may not be appealing to those who can't give control of their assets, according to this article on Morningstar. In some aspects, a single premium income annuity can be a better option than a QLAC, says Joe Tomlinson, an actuary and financial planner. "The appealing feature of the QLAC is that you're setting aside less money at 65 than you are for a SPIA. But you'll need to dedicate significant savings to meet your living expenses until the QLAC payments begin, and the liquidity of those dedicated savings isn't worth all that much." --Morningstar
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