Pay off student loans or save for retirement? The answer may be surprising
Should clients focus on paying off their student loan debt or saving for retirement? It depends on the investment details, writes an expert in The Wall Street Journal. "First, if your employer offers a match, contribute at least enough money to get it. Matches are 'free money' that give you a huge, instant return," writes the expert, who is a professor at the Wharton School of the University of Pennsylvania. "Second, make the minimum payments on any student debt with an interest rate less than about 3.75%. Third, pay down any debts with an interest rate above 3.75% as quickly as possible."
While Florida traditionally has been a popular retirement destination because of its year-long warm weather and lack of personal income tax, it recently has fallen in various surveys as many pre-retirees are having second thoughts about relocating there, according to this article from the Washington Post. And now, that sentiment has increased following Hurricane Irma. “It remains to be seen how the health care system will handle the increased demands placed on it by evacuations of the elderly and if they can get assistance to the most in need,” says an experts in this article.
A report from Fidelity says that clients should have saved an amount that is four times their annual income by age 45 if they intend to retire at 67, according to this article on CNBC. To achieve this, clients need to set aside 15% of their income starting at 25 and invest more than 50% of their savings over their lives. "The good news is that that 15% also includes any employer match," says an expert with Fidelity.
Although conversion is allowed, clients avoid converting inherited retirement assets into a Roth because the converted amount will be subject to federal income tax, according to this article on MarketWatch. Most of the clients who inherit 401(k) or traditional IRA assets are mostly workers, and the conversion could add up to their taxable income and push them to a higher tax rate. One option that non-spouse beneficiaries take is transferring the inherited assets to an inherited traditional IRA, where taxes will be paid once the clients start taking the distributions.
Thirty-four percent of entrepreneurs polled by small business online community Manta claimed that they have no retirement plan, according to this article from Fortune. Many small business owners said that they have not built a nest egg because they don’t have “enough profit to save for retirement” and they use “retirement savings to invest into my business,” the survey found. The findings suggest that self-employed people have not changed their savings practices despite a growing economy in recent years.
