Our daily roundup of retirement news your clients may be thinking about.
The Retirement Enhancement and Savings Act is back — and it does some good things
A pair of lawmakers have reintroduced the Retirement Enhancement and Savings Act, a piece of legislation that cleared the Finance Committee in 2016, but failed to get Congress's approval before it adjourned, according to this article on MarketWatch by Alicia H. Munnell, director of Boston College Center for Retirement Research. The bill "is a bundle of small changes that are aimed at increasing voluntary retirement savings," writes Munnell. The individual pieces are small, but “together they merit a bill,” she writes. The first sections of the bill are aimed at increasing potential access to low-cost Multiple Employer Plans. A second group of proposals offers increased financial incentives for small businesses to start new plans and additional incentives for auto-enrollment. The area where the act may have its biggest impact is in lifetime income. Specifically, it would help participants to think in terms of lifetime income — as opposed to accumulated balances — by requiring that benefit statements include estimates of lifetime income at least once a year. It also directs the Department of Labor to develop a model for constructing income estimates.
Four strategies to lower taxable income under new tax brackets
One option for clients to consider under the new tax brackets is to convert their traditional IRA assets into a Roth, writes an expert for The Wall Street Journal. That's because clients will have to start collecting Social Security benefits and taking required minimum distributions when they reach 70 1/2, boosting their taxable income in the process. "This basic, but powerful, technique can lower the tax burden on thousands of tax-deferred dollars with some proactive annual tax planning."
How to extract income from a retirement portfolio
Morningstar's Christine Benz compares various strategies for drawing income from a retirement portfolio, analyzing the pros and cons of each of these strategies in this article. "Given that yields and market returns often move in different directions, I think it's advisable to take a flexible approach to generating cash flow for retirement," writes the expert. For example, "when yields are meager, as they have been for the past decade, pruning appreciated positions to meet living expenses is a way to raise cash while also reducing a portfolio's risk level."
Pros and cons of taking Social Security at 70
Waiting until the age of 70 to claim Social Security retirement benefits can be a smart strategy, as it will result in a much higher monthly benefit payout, according to this article on personal finance website Motley Fool. However, seniors who opt to delay the benefit could experience financial hardships as they may no longer have an income, and they may be too old or die too soon to enjoy the benefits. And those who don't need their retirement benefits may miss out on the opportunity to invest the money for possible growth while they still can.
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