What to consider with target-date funds: Retirement Scan

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

What to consider when investing in target date retirement funds
Investing in target-date funds can be a strong option for most retirement savers, but there are some pitfalls to bear in mind. First, some of them are relatively costly, with an average expense of about 1%, according to this article in the Los Angeles Times. They also can get too conservative more quickly than they should as they get close to the retirement date. Investors may not be able to maximize their returns as they get too much or too less exposure to risks or fail to get their portfolio well-diversified, writes the expert. "If you don’t know what you’re doing, or you simply prefer investing professionals to take charge, target date funds are a good way to go."

Why retirees should own stocks
Retirement savers should continue holding stocks in their portfolio as they age, as the stocks' growth potential can help offset the impact of inflation and possible increase in costs, such as health care expenses, according to this article on personal finance website Motley Fool. However, retirees should maintain a well-balanced portfolio of stocks and bonds to ensure their nest egg will last, as putting too much in either investment type could present a risk.

How retirement hurts living standards for boomers
A study by the National Bureau of Economic Research indicates big "tax disincentives" facing baby boomers who continue working but opt to collect Social Security benefits at age 62, according to this article on CBS Moneywatch. Working retirees may lose $1 of $2 that they earn because of the 50% marginal tax rate on their income above their monthly Social Security benefits, the study found. “Many, if not most, baby boomers appear at risk of suffering a major decline in their living standard in retirement.”

6 ways for clients to keep their dream retirement on track
Some clients are not well prepared for retirement, as they consult a financial adviser only when they are about to retire, according to this article on MarketWatch. A case in point is a couple who face a hefty tax bill in retirement, as they have put all their retirement savings in tax-deferred accounts. Clients should seek professional help as early as possible so they can prepare well for the golden years and take actions to ensure that they are on track in realizing their retirement goals.

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