Our daily roundup of retirement news your clients may be thinking about.
Increased longevity of workers prompted the IRS to release in December new actuarial tables requiring private pension plans to adjust their mortality assumption, writes a Forbes contributor. Public pensions should also follow suit, writes the expert. "Unfortunately, these regulations do not apply to state and local public pensions. As such, public pension plans continue to bury their heads in the sand living in a time warp of decades-old actuarial assumptions."
Uncapped fixed index annuities can be a good alternative to bonds for investors looking for safer investments as they get close to retirement, according to this article on Kiplinger. That's because unlike bonds, these financial products do not suffer losses amid rising interest rates, and they have other advantages such as tax-deferral in retirement accounts and sustainable lifetime income with a rider offering. “Conventional wisdom has most investors de-risking their portfolios by allocating more heavily to bonds as they approach retirement... In this low-interest-rate environment, complacency can be a danger to [investors’] futures,” says an expert.
Market risk, inflation and taxes are among the blind spots that can throw seniors off the track for a comfortable retirement, writes Morningstar's Christine Benz. Healthcare, long-term care costs as well as unexpected expenses can also bring unpleasant outcome for retirees, writes the expert. "[B]efore you pull the rip cord and start relying on your portfolio--rather than your salary--for living expenses, it's wise to make sure you're not missing anything on the financial front."
An expert says that although a Roth IRA has income qualification limits, high income investors have the option of using the backdoor Roth strategy to contribute to the account, according to this article on Fox Business. However, consulting an accountant or a tax professional is recommended, as the strategy could trigger a tax event, explains the expert. "If the investor is still working and earns uneven income from one year to the next, they can potentially take advantage of the 'lean' years to convert a higher balance to Roth since they may be in a lower tax bracket. Further, the investor can 'spread' the tax burden across years by converting in stages rather than all at once."
Although a report from Social Security Board of Trustees shows that its asset reserves will be depleted by 2034, the program has other sources of revenue to pay its benefit obligations, according to this article on Motley Fool. In fact, the report shows that Social Security generated $996.6 billion in income last year, thanks to payroll taxes, taxes on the benefits and interest earnings from asset reserves.
