Our daily roundup of retirement news your clients may be thinking about.
Buying a dependable second-hand car, instead of new car, allows clients to free up more money that they can save for their golden years, according to this article on personal finance website Motley Fool. For example, by opting for a second-hand Honda Accord, which has been found to be one of the longest-lasting vehicles, clients can reduce their monthly payment for a car loan to $250 from $503 if they had decided to buy a brand new unit of this model. If they redirect the $250 they save monthly in a tax deductible IRA starting at age 25, they may end up with $621,000 by the time they reach 65 if the savings grow 7% annually.
As health care expenses are expected to increase in retirement, many people are becoming more anxious about their financial prospects in the golden years, according to this article on MarketWatch. To prepare for health care costs in retirement, clients may have the option to contribute to a health savings account, which accepts pretax contributions, offers tax-free growth on investments, and provides tax-exempt withdrawals for qualified medical expenses. While having Medicare is a great help to cover medical expenses, experts say that clients might be better off using funds from HSAs to pay these expenses, although they will owe income taxes for withdrawing the funds to defray nonmedical expenses.
A report from the Bureau of Economic Analysis says that the personal savings rate of Americans dropped to 3.8% in June from around 5% over the last year, according to this article on USA Today. Ideally, Americans should set aside 10% to 15% of their disposable income for retirement and other financial needs, says a certified financial planner. “I have seen too many people in their golden years being forced to work because Social Security income does not cover their basic expenses,” says the expert. “And while I think it’s a great idea for seniors to be active and possibly working to keep busy, I don’t want them to have to rely on that income.”
A study has found that women are more likely than men to quit working or opt for a part-time job when their spouse gets seriously ill, according to this article on Forbes. “Women are bearing a lot of the responsibility when life intervenes around retirement,” says an expert with Boston College's Center for Retirement Research. “They are more sensitive to work-life balance and the decision to transition to part-time work or retire.”
