Many clients may have access to a Roth 401(k) but they do not fully appreciate the features and benefits of this account, according to this article from USA Today. For example, it has more flexible rules than a Roth IRA, and it is funded with after-tax dollars. Clients are likely to have tax-efficient income in retirement if they contribute to a traditional and Roth 401(k). “Most people who have pretax dollars in retirement find themselves paying far more in taxes than they ever thought possible,” says a financial adviser. “The Roth 401(k) is certainly one way to diffuse the potential tax bomb.”
Clients should not be intimidated or get scared by retirement planning, and instead should begin to plan as early as possible, according to this article from Kiplinger. They may start by creating a Social Security claiming strategy that would maximize their benefits, and decide whether to take a lump sum or regular payments from their pension plans. Clients should also think of the desired lifestyle so they can anticipate the expenses and determine whether they can afford it.
When investing for retirement, clients are advised to account for their risk tolerance, writes an expert on Forbes. "This is the appropriate portfolio risk that a person would be most comfortable taking with their investments," writes the expert. "It depends on the investment return you need to produce an acceptable retirement income and the asset allocation that will give you that return, and it is a delicate balance between emotions and financial reality."
Data from NerdWallet shows that average millennials have $670 in extra money every month, and they could end up a millionaire in retirement if they invest the money at an 8% return, according to this article on CNBC. While student loan and credit card debt can reduce the amount of extra money they have, clients can start with a small savings rate, says an expert. "The idea is to have a plan, and then to work that plan so that it takes the anxiety and stress out, not that it makes you feel worse about the situation."
As the end of the year approaches, retirees should revisit their Medicare coverage and consider shopping for a better policy, according to this article on Morningstar. They are also advised to create a strategy for their charitable donations and make sure they take their required minimum distributions. Another strategy is to evaluate their taxes in taxable accounts and find ways to make their portfolio more tax efficient.
