When it comes to distributions, 401(k) plans lack flexibility: Retirement Scan

Register now

When it comes to retirement distributions, 401(k)s lack valuable flexibility
A 401(k) plan offers less flexibility than an IRA for retirement savers taking distributions, according to this article on Morningstar. The withdrawal options for 401(k) participants are limited to taking a lump-sum distribution, buying an income annuity and taking their 401(k) distributions in installments. 401(k) withdrawals are also governed by pro-rata rules. Unlike a 401(k) plan, an IRA is not subject to these rules, allowing investors to make withdrawals that conform to their portfolio strategy.

Home sharing has real benefits for retirees
Retirees with limited income may want to consider renting out a portion of their house to help cover their expenses, according to this article on MarketWatch. This option is also recommended to seniors who wish to stay in their home after retirement and don't want to downsize. Another benefit of house-sharing is the help that they can get around the house, which they will need as they get old and become physically unable to do some household tasks.

AARP: Any Social Security COLA would be better than $0
Although the projected increase in Social Security cost-of-living adjustment could mean only $3 per month on the average, the small adjustment is still significant for the program's 60 million beneficiaries, according to this article from USA Today. However, this increase will be offset by Medicare price increase. The COLA should be determined based on the U.S. Bureau of Labor Statistics' Experimental Price Index for the Elderly, which better reflects older people's consumption. The CPI-E "shows that the rate of inflation for those 62 and older has been higher than the rate measured by either the CPI-W or other indexes in most years."

Annuities offer long-term care funding flexibility
Annuities can help clients prepare for the financial burden of long-term care in retirement, according to this article on Forbes. While not all annuity products can be part of a long-term care funding plan, clients with an unsuitable insurance coverage or annuity can use a 1035 exchange to obtain a different annuity or hybrid annuity product that can help fund their future long-term care needs. When buying an annuity or a hybrid product, clients should ensure that their decision works within their comprehensive retirement income plan.

Just how much money do you really need for retirement?
When preparing for retirement, clients should save as much as they can, invest wisely, and determine the kind of lifestyle they can afford based on their savings, according to this article on personal finance website Motley Fool. They should make their retirement budget more flexible to cover unforeseen costs, such as healthcare expenses. Another strategy is to compute their expenses in retirement and determine how much they have to save to cover these needs.

For reprint and licensing requests for this article, click here.