Comparing self-employed retirement plans

Register now

Our daily roundup of retirement news your clients may be thinking about.

Should clients follow Warren Buffett's 90/10 investing strategy?
Retirement investors may want to adopt Warren Buffett's investing strategy if their risk tolerance allows them given current market realities, according to this article on CNNMoney. Buffett's strategy allows for retirement assets to be invested 90% in stocks and 10% in bonds. However, such an approach may not be appropriate for clients who are approaching retirement or have retired.

Comparing self-employed retirement plans: Solo 401(k) vs. SEP IRA vs. SIMPLE IRA
The solo 401(k), the SEP IRA and a SIMPLE IRA are retirement savings vehicles that are meant for contractors, freelancers and other self-employed individuals, according to this article on Kiplinger. The solo 401(k) is recommended for business owners with no employees and employees who have a side business. A Simple IRA is for businesses with not more than 100 workers and self-employed clients with no steady income. Those who posted a good profit but is not yet ready to set up a plan may opt for a SEP IRA.

Can I get money from my 401(k) at 55?
401(k) participants are allowed to tap into their accounts without facing a penalty at age 55 if they meet the requirements, according to this article on Motley Fool. This option is available for workers who leave their employer that sponsors their plan in the year they turn 55. This means that they cannot make a tax-free withdrawal with their old 401(k) plan or with the plan sponsored by their current employer.

My father is moving to a retirement community — what do we do with his $1.8 million home?
Clients who receive a family home as a gift from their parents while their elders are still alive cannot claim the $250,000 capital gains exemption when selling the property, according to this article on MarketWatch. They will also assume their parent's basis in the property and owe taxes on the capital gains of the sale proceeds. They should also ensure that their parents get appropriate insurance coverage for the house in case they leave the property and move to a retirement community. “Change to non-ownership status increases the risks to the insurer and can result in a denial of claims,” says an expert.

Retiring with debt: Mortgage, home-equity loans, credit cards
Clients with heavy debt load are advised to continue working past their retirement age to pay down debt before leaving the labor force for good, according to this article on TheStreet. They should also determine whether carrying mortgage, home-equity loans and other loans will enable them to optimize the tax benefits under the new tax law. "As Americans enter retirement and reach the end of the accumulation phase of their lifecycle, the optimal management of debt needs to be well-thought-out. Debt is only one component of the financial puzzle and cannot be assessed in isolation," says a wealth advisor.

For reprint and licensing requests for this article, click here.
Retirement planning Retirement withdrawals IRAs 401(k) Mortgages Home equity loans Credit cards