Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about.
Seniors who are forced to retire earlier than planned could put their financial stability at risk, according to this article from Motley Fool. To reduce the impact of a forced retirement, seniors are advised to take on a part-time job or reduce their expenses by downsizing. Moving to a location that has lower taxes and a lower cost of living is another option for clients who are compelled to retire early, according to the article.
An ideal retirement age varies from one state to another, even with the same assumptions, according to a study by GOBankingRates in this Yahoo Finance article. For example, working clients who started their careers at the age of 22 — and who followed the 50/30/20 budget rule and socked away 20% of income to retirement savings — may retire at age 59 if they live in Alabama or at age 61 if they are in Florida, the study found. A realistic retirement age for clients with the same circumstances in New York and California is 66, while those who live in Texas could retire ideally at age 57.
Seniors may opt for substantially equal periodic payments to avoid penalties when taking early withdrawals from tax-deferred retirement accounts, writes an investment advisor in Kiplinger. "Section 72(t)(2)(A)(iv) is where you’ll find information about the exception that allows you to use a series of substantially equal periodic payments (SEPPs) based on life expectancy to withdraw money from your IRA or 401(k) for a minimum of five years, or until you reach age 59½, whichever comes later," he writes.
Converting traditional IRA assets into a Roth can be a smart move for clients who want to protect their beneficiaries from the tax impact as a result of the disappearance of the "stretch IRA" strategy under the Secure Act, according to this article from NerdWallet. However, this option does not make sense for all clients, especially for those who are in a high tax bracket, as Roth conversion will trigger a tax bill. Clients are advised to consider a Roth conversion if they are currently in a low tax bracket or they share the same tax bracket as their heirs, according to the article.
Certain locations can help clients maintain their lifestyles — or even improve them.
Boosting your clients’ retirement plan contributions even by a small percentage of their income can help grow their retirement prospects, according to this article from CNBC. "Those small jumps by just 1% or 2% over a 20-year or 30-year career can really make a big difference in the end,” says an expert with Fidelity Investments. “The longer that money is in the plan and has time to grow, the better off you are.”
