Our daily roundup of retirement news your clients may be thinking about.
3 Smart Fixes for Social Security and Medicare
As workers are now allowed to have longevity annuities in their tax-deferred retirement accounts, Social Security is being urged to increase full retirement age to 68, 69, or even 70, according to CNN Money. There are also other proposed reforms to enhance services for retirees, including one that seeks lower Social Security payroll taxes for those who intend to continue working through retirement. It is proposed that working retirees be given a hybrid form of Medicare merged with employer health insurance, and that Medicaid be revamped by creating a trust fund to cover long-term care costs. -- CNN Money
The easy way to increase your nest egg
As the expense ratio with mutual funds is 1%, retirement investors may consider switching to exchange-traded funds, which charge a cheaper fee, according to Forbes. ETFs that cost 0.35% annually could yield $520,098 after 30 years, while a mutual fund that charges 1.5% yearly would only grow to $374,532. Clients also can expect a better return from ETFs than mutual funds in a flat market, and can do away with unnecessary fees and sales charges. --Forbes
Claiming the ex-Wife's Social Security benefits
Divorced clients can boost their retirement income by seeking a spousal benefit from their ex-spouses' accounts even if their spouses haven't started receiving their own benefits, according to The Wall Street Journal. In this article, a financial advisor shares how the same advice helped a 66-year-old client who refused to tap his retirement funds for fear that he would outlive his nest egg. The client was pleased with the outcome despite the benefit he was receiving, which was 50% of his ex-wife's benefit, the advisor said. --Wall Street Journal
Return envy: Why style drift matters
"Style drift," or the discrepancy in the expected and actual investments that mutual funds hold, can be a serious problem for retirement investors who intend to abide by their investment plans and rebalance their portfolios, according to MarketWatch. It will also cause clients more trouble if prices get too high, as such a scenario should prompt investors to sell. It will be good for investors to drop index funds from their portfolio and opt for a strong and simple rebalancing strategy that will result in increased predictable returns. --MarketWatch
A Nobel Laureate's retirement proposal
A proposal by Nobel Prize winner Robert Merton, which seeks to redefine 401(k) plans as savings based on target income instead of on a target wealth amount, may be attractive in the retirement crisis, but the benefits are overstated, according to Morningstar. The proposal will not address the major issues with retirement planning, such as restoring defined-benefit plans and helping millions of workers gain access to 401(k) plans. The proposal will also not boost 401(k) contributions or lead to lower consumer debt, which are other important concerns. --Morningstar
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