Our daily roundup of retirement news your clients may be thinking about.
Companies should have to offer low-cost funds in 401(k)s
Companies can help their employees boost their retirement savings by offering low-cost investment options in their 401(k) plans, writes Mike Piper, author of the blog ObliviousInvestor.com. Many employer-sponsored retirement plans offer mutual funds that charge hefty fees, keeping the participants from accumulating assets, Piper writes. "... It would be great to mandate their availability in employer-sponsored plans, given the evidence in favor of them. Perhaps just a single low-cost bond fund and a single low-cost stock fund in each plan." --The Wall Street Journal
The 3 secrets to maxing out Social Security spousal benefits
A client whose spousal benefit on her husband's record is lower than her own retirement benefit can maximize her spousal benefits if her husband starts collecting his retirement benefits first, according to this article on Time Money. She can expect a smaller value of her spousal benefit if she applies for the benefit before reaching full retirement age. If the couple decides to delay their benefits until FRA, they are advised to use a file-and-suspend strategy, in which the spouse with higher earnings spouse will file for and suspend benefits until he reaches FRA. --Time Money
Why your retirement will cost more than you think
Although several expense items will be gone from the clients' budget list when they retire, new costs will be added, and some of them may be related to aging, according to this article on The Motley Fool. Retirees will need about 70% replacement of their pre-retirement income to cover these expenses, according to Social Security, while Fidelity and other experts have a higher estimate --about 85%. Social Security benefits will be 40% of the retirement income, so all told retirees should 300 times their monthly costs they expect to fill the gap. --The Motley Fool
Securing retirement income with annuities
Using a portion of a 401(k) plan to buy a longevity annuity is one strategy that clients may consider to ensure they will have a steady income stream in retirement, according to this article on USA Today. Workers are allowed to buy qualified longevity annuity contract within their 401(k) plans as well as traditional IRAs under final regulations issued by the Internal Revenue Service in July 2014. The rules allow retirement savers to use up to 25% of their accounts to obtain a QLAC, with the amount for funding QLACs limited to $125,000. --USA Today
4 serious retirement plan errors to avoid
Not taking advantage of the employer's 401(k) match contributions is a serious mistake that workers make, since they miss out on taking free money on the table and the potential growth of the money through compounding, according to this article in U.S. News & World Report. It is also a mistake for 401(k) participants to allow the plan manager to make the investing decisions for them. Other errors that can have a serious impact on workers' retirement prospects are tapping these accounts when they face a financial crisis and starting building their nest eggs at a later age. --Yahoo Finance
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