Why it’s important to not skip Medicare open enrollment: Retirement Scan

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

Why it’s important to not skip Medicare open enrollment
Clients are advised to make the most of Medicare open enrollment, which starts on Oct. 15 and ends Dec. 7, according to this article on MarketWatch. The open enrollment offers an opportunity for seniors to change their plans to save hundreds of dollars. To make the right decision, Medicare beneficiaries are advised to review their existing plan, to ensure their doctor still honors their Advantage plan, and to check their prescription drugs. They should also factor in premiums and out-of-pocket costs and the Medicare Advantage maximum out-of-pocket limit. Seeking professional advice is also recommended to help them arrive at the right decision.

How to defuse the tax bomb in your clients' retirement plans
To minimize the tax bite on their savings and maximize after-tax income in retirement, clients may consider using a portion of their traditional IRA to buy a Qualifying Longevity Annuity Contract, according to this article on Forbes. They may also consider purchasing fixed and variable deferred annuities and investing in stocks, as dividends are taxed at a lower rate or not taxed depending on their tax bracket. Another option is to tap their home equity by applying for a reverse mortgage for tax-free income, or home equity line of credit with a tax-deductible interest.

Using 'brokerage window' to expand 401(k) options
Clients with a 401(k) that want to manage their own investments should use their employer's brokerage window, which allows employees to choose their investments from a broader menu of individual stocks and mutual funds, according to this article on CNBC. More employers are offering brokerage window to their workers. "About 15% to 20% of our overall book of plans uses these, but 45% to 50% of the very large firms offer them," says an expert with Fidelity. "The large plans have a level of sophistication from an administrative standpoint. They have educational programs and oversight that allows them to take that responsibility on."

How the new fiduciary ruling might save clients thousands in retirement savings
While the DoL's fiduciary rule will mandate that retirement savers receive investment advice that is in their best interests, young investors may find limited players offering a start-up retirement plan, according to this article on Kiplinger. That is because players that still stick to the old commission-based models cannot offer their services to young retirement investors. Technology creates better options for these young investors, but they will face an advisory fee instead of commissions.

Will your clients' retirement get whacked by the WEP?
People who worked both in public and private sectors are likely to receive Social Security benefit that is lower than what they expect, according to this article on Morningstar. That is because of the Windfall Elimination Provision, which is implemented to prevent double-dipping from Social Security and public-sector pensions. Some lawmakers are looking at revamping the WEP, as it results in inequity for low-income workers who are expected to depend mostly on Social Security for retirement income.

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