Why employees should look beyond target-date funds
Our daily roundup of retirement news your clients may be thinking about.
Why clients should look beyond target-date funds
Retirement savers should weigh other alternatives to target-date funds when building their 401(k) portfolio, writes an expert on The Wall Street Journal’s website. Designed for a specific retirement date with a "one-size-fits-all" approach to risk, a TDF is not meant for everybody, as personal circumstances vary among clients, the expert explains. 401(k) investors may be better off having a managed account, which is "an in-plan robo-advice solution that attempts to replicate adviser input using a rules-based approach," the expert writes. "With managed accounts, each person has a customized portfolio built using the investment options available in the plan. And the costs are typically far lower than those of a human adviser."
If you care about cost control, don’t mess with Medicare
The proposed voucher plan aimed at putting Medicare's cost under control is not the right solution to fix the problem, as the program's spending grows at a slower pace than that of private insurers, according to an article on MarketWatch by Alicia H. Munnell, director of Boston College's Center for Retirement Research. "If the annual percentage increase in costs for private insurers — who cover a population with fewer health care needs — already outpaces Medicare spending growth, their costs are likely to rise significantly faster when they cover a costlier population," Munnell writes. "The only way to win the health insurance game is to get the costs of health care under control, and the numbers say that Medicare is a much more effective mechanism than private insurance."
Millennials may need to double how much they save for retirement
Millennials have to save more—perhaps twice the amount that their elders had—to secure their retirement, as the markets no longer generate as much returns as in the past, according to this article on the Washington Post’s website. “Realistically, most people who are reading this article probably should expect to work a little bit longer than their parents did,” says an expert.
The biggest Social Security change in 2017 that's not being advertised
People who were born in 1960 and later can start collecting Social Security retirement benefits as soon as they reach 62, but their full retirement age has been increased to 67, according to this article on Motley Fool. Although raising the FRA is intended to encourage healthier older workers to stay longer in the workforce, seniors who are affected by this change will have to wait longer to get their full retirement benefits than those who came before them, or they will face reduced benefits if they file before reaching the age of 67.