Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about.
Although sticking to the 4% retirement income rule offers a layer of protection for retirees, it does not guarantee that seniors will outlive their savings, a Forbes contributor writes. While there are strategies to help reduce risk, clients should realize that the order of investment returns is crucially important, according to the expert. "Creating a safe retirement income distribution plan is not as simple as following the 4% rule."
Retirees are advised to not rely heavily on their stock investments to develop an income strategy in retirement, as market volatility could intensify at any time and hurt the stocks' ability to generate returns, an investment advisor representative writes in Kiplinger. "A recession just before or after you enter retirement can devastate even the most promising portfolio," he writes. "How the stock market performs as you begin taking withdrawals can have a dramatic effect on your savings."
There are several mistakes working clients are advised to avoid to make the most of their employer-sponsored 401(k) plans, according to this Motley Fool article. For example, those still working should ensure they participate in their company plans, contribute an adequate amount to qualify for an employer match and regularly raise their contributions. They should also be mindful of the 401(k) fees and make after-tax Roth contributions if their plan offers such a feature to create a source of tax-free income in retirement.
Doing a Roth conversion is one strategy to create tax-free income in retirement, but such an option will not work for all of your clients, according to this article in CNBC. Converting traditional assets into a Roth makes more sense if clients think that their current tax bracket is lower than their tax bracket in retirement. Those who opt to do a Roth conversion can move assets from their traditional accounts to a Roth through an indirect rollover, trustee-to-trustee transfer or same trustee transfer.
At 84 basis points, the average expense ratio is over 40 basis points pricier than what investors paid on average last year.
Taking a qualified charitable distribution from a traditional IRA is one way for retirees to comply with the required minimum distribution rules, according to this article in Yahoo Finance. A QCD allows retirees who are 70 1/2 and older to donate the RMD amount from the IRA directly to a qualified charity. By making a QCD, retirees will avoid the tax bite on the mandatory withdrawal.
