Our daily roundup of retirement news your clients may be thinking about.
The changes under the tax law should prompt clients to revise their estate plan, according to this article on MarketWatch. For example, there will no longer be federal tax on estates valued between $5.6 million and $11.2 million ($22.4 million for married couples). Previously, the limit was $5.6 million. Making this exemption, Congress gave substantial relief to all but the wealthiest families. Estate plans also need to use portability correctly, which is the ability of a spouse to avoid estate tax on the amount inherited from the other spouse that was within the exemption limits. To assure that exemption limits from deceased spouse are portable, estate planning documents of the surviving spouse must correctly invoke portability, using the right language. Otherwise, the estates might be forced to create a bypass trust—a costly, time-consuming route that can ultimately reducing the amounts that heirs ultimately receive.
A report from the Employee Benefits Research Institute shows that Americans in the $10,000 to $24,999 salary range have $3,203 on average in their 401(k) plans, according to this article on personal finance website Motley Fool. The average 401(k) balance is $2,710 for people in the $25,000-$49,999 salary range and $4,197 for those in the $50,000 - $74,999 range. To boost retirement contributions, clients should reduce spending, take on a side gig, sock away their salary increase, and emulate older clients who contribute the maximum amount to their accounts.
A bear market is likely in the foreseeable future, so clients should prepare for it, according to this article from Kiplinger. When preparing for a market slowdown, clients should start with a portfolio analysis, move some money to cash and invest in companies that can withstand a bear market. They should also consider alternative investments and shift to safer investments such as a fixed annuity and certificate of deposit.
Not knowing the differences between a traditional IRA and a Roth IRA could be costly for retirement savers, according to this article on CNBC. "With a traditional IRA, you're at the mercy or uncertainty of what future higher tax rates might do to your retirement savings," says an expert. "With a Roth IRA, you don't have to worry about future rates, because your tax rate in retirement will be zero."
Clients may want to use the Spend Safely in Retirement Strategy to ensure that they will have guaranteed income in retirement even without buying an annuity product, according to this article from Forbes. This strategy will require them to look for a claiming strategy that will optimize their Social Security benefits. The approach also calls for optimal investing and withdrawal strategies such as investing in target date, balanced or stock index funds and other low-cost mutual funds. Clients may also opt to continue working in retirement and live off on their wage, so they can delay their Social Security benefits.
