Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about
Working clients are advised to continue making contributions to their 401(k)s amid the market slowdown caused by the coronavirus pandemic, according to this article in Motley Fool. That's because the correction presents a great time to invest, as many stocks are sold at bargain prices. Funding a 401(k) will also allow them to get their employer's match and help them lower their taxable income and their tax bill, as the contributions are made on a pretax basis.
Writing a retirement policy statement that describes an approach to tap an investment portfolio is one move retirees may consider amid the coronavirus crisis, says Morningstar's Christine Benz. "I think that's a healthy habit to get into with respect to your investment plan and your financial plan because if you've taken the time to create a policy statement, you probably won't override it and that can lead to healthy habits down the line."
Clients who want to protect their retirement plans are advised to shore up their cash reserve and create dynamic income streams, a CFP in Kiplinger writes. They are advised to also consider refinancing and harvest losses or realize gains to help minimize their taxable income, he writes. While doing a Roth conversion during this time will trigger a tax bill, gains from a market rebound in the future will be tax-free.
Although the Secure Act has scrapped the stretch IRA option for non-spouse beneficiaries, spouses, minors, sick or disabled heirs and those within 10 years of the age of the original IRA holders can still use the tax-saving strategy, an expert in Forbes writes. IRA investors can help their heirs mitigate the impact of taxes on inherited assets using life insurance, irrevocable trusts and a Roth conversion, the expert writes. Converting traditional assets into a Roth before the owner's death "would maximize the beneficiary’s wealth, create lower taxes in retirement and avoid the Secure Act’s 10-year distribution rule."
