Time is running out for elderly clients to avoid this IRS penalty
Our daily roundup of retirement news your clients may be thinking about.
Elderly clients have 2 weeks to avoid a 50% IRS penalty
Retirees aged 70 1/2 and older should consider taking the required minimum distribution from their tax-deferred retirement accounts by Dec. 31, according to an article on Motley Fool. Not taking the mandatory distribution on time will trigger a tax penalty equal to 50% of the RMD amount. Although retirees taking the RMD for the first time have until April to make the withdrawal, this option could mean two RMDs next year, which might boost taxable income and push retirees to a higher tax bracket.
When couples retire together — or don't
About 43% of married couples did not agree on the age they intend to retire, according to a recent survey in this Morningstar article. While some experts see this as a problem, others think staggered retirement dates present a great opportunity. "For many people, it's a good idea to talk about retirement in two phases. It might be that you'll be operating a little more independently of one another in the first phase, and more together later on," says an expert.
Maximize client Roth savings through "back door" contributions
Retiring clients who cannot sock away more money to a Roth IRA because of the contribution limit — but still want to ramp up their account balance — could use the "back-door Roth IRA" strategy, according to an article on CBS Moneywatch. To do this, they should participate in a 401(k) plan, make after tax contributions and move the money to a Roth IRA through an in-service withdrawal. They should make the transfer as soon as they make contributions in order to avoid the funds accruing taxable earnings.
5 end-of-year strategies to get your client’s finances in order
Maxing out retirement plan contributions is one of the financial moves clients might want to consider before the year ends, a Forbes contributor writes. Workers have the option of making a lump-sum or end-of-year salary deferral, depending on their employer's plan, the expert adds. They should also contribute enough to get their employer's matching contribution. "Even if you can’t get it all done by the end of this year, make sure you are set up to get the full match in 2019."