Our daily roundup of retirement news your clients may be thinking about.
Rising interest rates can be a boon for seniors seeking better returns from low-risk investments, but can be the bane for other clients with adjustable-rate mortgages, according to this article on MarketWatch. For investors saving for retirement, this could also mean putting less weight on stock holdings, as they will no longer have enough time to recover from a market correction. Despite the new tax law, tax-free municipal bonds remain a good option, especially "for investors who are above the 10% to 15% tax bracket,” says an expert.
Clients are advised to take advantage of a Roth IRA, as the account offers tax-free income in retirement, writes an expert for Kiplinger. To fund a Roth IRA, clients should have earned income, and the amount of contributions they can make will be limited based on whichever is lower between the amount of income or $5,500 ($6,5000 for those aged older than 50). Clients also have the option of rolling assets from a Roth 401(k) or a 403(b). Converting a portion of their assets in a traditional 401(k) or traditional IRA is another way of funding a Roth IRA, but this could trigger a tax event, since contributions to these traditional accounts are pretax.
Retirement savers who are contributing the maximum amount to their 401(k) plans and have extra money to save should consider directing the funds to a health savings account, according to this article on CNBC. With the rising health care costs, an HSA is a good place to invest their savings, as it offers tax deduction on the contributions, tax-free growth on investments and tax-exempt withdrawals for qualified medical expenses. "If you're expected to spend $275,000 on health care in retirement, where can you get the most bang for your buck?" says an expert with TD Ameritrade.
Almost a quarter of Americans (23%) don't have any emergency funds, according to this article on personal finance website Motley Fool, citing data from Bankrate. Instead of relying on credit cards, clients should consider raising some cash reserves slowly while they still have extra funds to save. To free up more money to save, clients should consider reducing their spending, downsizing and getting a side job.
The national old-age dependency ratio is expected to rise to 35 retirees per 100 working Americans by 2030 from 25 retirees per 100 workers, according to this article from The Wall Street Journal, citing census projections. The rising trend could put a strain on entitlement programs such as Social Security and Medicare. “You have this top-heavy age distribution that is basically uncharted waters,” says an analyst. “The failure to face what’s evident, right in front of our eyes, is a form of generational theft.”
