Our daily roundup of retirement news your clients may be thinking about.
Holding a 401(k) plan, an IRA or other tax-advantaged investments is a better strategy to build wealth than owning a home, according to a study by HelloWallet. Many people overstate the tax benefits of homeownership, with these benefits just a bit higher than the standard federal tax deduction, the study found. As tax benefits of owning a home dwindles over time, changing the mortgage interest deduction to a refundable tax credit for homeownership with an equal-sized refundable tax credit for retirement savings would send a signal that there are tax benefits to either approach to building wealth. Washington Post
Retirees with Roth IRAs would be required to start taking RMDs when they turn 70 1/2 and non-spousal IRA beneficiaries would disburse inherited IRAs within five years of the owner's death under President Barack Obama's 2015 budget proposal. The proposed changes are meant to increase government revenue, says Michael Rubin, CFP professional and founder of Total Candor. While the proposal is yet to be approved by Congress, investors are advised to limit their Roth IRA assets and to diversify their investments, Rubin says. Fox Business
The federal government is likely to reduce Social Security and Medicare benefits following Republicans' victory in the midterm elections, according to this article on Time Money. However, Congress and the Obama administration can work together to look for ways that will push workers to save for retirement. Aside from Social Security and Medicare, there could also be changes to the Affordable Care Act, pension, and retirement saving that would affect retirement security. Time Money
Having preferred stocks in retirement portfolio could cause confusion among retiree investors, according to an article on MarketWatch. Although these stocks are technically considered equities, these products behave like both stocks and bonds. Retirees who depend on their investments for current income may consider preferred stocks, but need to know more about these stocks and get professional advice. MarketWatch
Americans are expected to live longer, based on projections from the Society of Actuaries, and the increase in life span will have "direct implications" for pension plans, writes Mark Miller of Morningstar. As pension plan sponsors have to raise their projected future costs because of higher life expectancy projections, these sponsors are likely to adopt strategies to curb risk, such as offering lump sum payment to retirees. Plan sponsors may also opt to reduce equity exposure in plan portfolios or transfer their obligations to private insurers by buying huge group annuities, Miller writes. Morningstar