Our daily roundup of retirement news your clients may be thinking about.
Federal employees who retire during the partial government shutdown would have to wait a longer time to take retirement distributions from their Thrift Savings Plan, according to this article from the Washington Post. That's because the employees who are supposed to work on their papers are furloughed. Would-be retirees need to secure a separation code from the Office of Personnel Management before the TSP can process their retirement packages.
The 401(k) plan and IRA are subject to different rules because they were created under different circumstances, according to this Q&A article from the Los Angeles Times. The 401(k) was created accidentally as an alternative to cash bonuses, while IRA was meant to give workers an opportunity to build savings independently of their employers. Both savings vehicles have different contribution limits, but clients can direct extra money to a taxable account, which offers favorable capital gains treatment for long-term investments.
A report from AARP and the Ad Council shows that paying off debt is a top priority for 33% of Gen Xers and younger baby boomers, according to this article on CNBC. Only 21% of the respondents put retirement savings on top of their financial concerns, with 11% considering emergency fund a top worry, the report says. "The here and now is much more of a bigger concern than the future, which is human nature. But the debt burden is nothing to laugh about," says an expert with AARP.
Clients who want to enhance their financial health this year should resolve to start saving as early as they can, according to this article on MarketWatch. They should also be determined to contribute enough to their 401(k)s to get the employer's match and avoid taking a 401(k) loan as much as possible. Consulting a financial professional is also recommended to ensure that they are on track in achieving their savings goals.
