Our daily roundup of retirement news your clients may be thinking about.
The decision by Rep. John Larson, D-Conn., to reintroduce legislation that seeks to adjust the cap on Social Security wages and to raise the payroll tax is a step in the right direction in fixing the program's solvency woes, writes an expert on CNBC. "Asking Social Security beneficiaries to pay the price is not a fair — or successful — strategy for keeping the system solvent," writes the expert. "The high cost of living, health care, housing and college (among other expenses) means working families are less able to save for retirement."
Workers should consider making after-tax 401(k) contributions if their plan offers such an option, according to this article on Morningstar. Under the Internal Revenue Service rules, the contributions effectively become Roth IRA if right steps were followed in converting the money into a Roth IRA, giving retirement savers more access to Roth contributions. However, after-tax 401(k) contributions do not yield tax-free compounded growth until they are transferred into an IRA, says an expert. "You can literally think of the after-tax 401(k) conversion strategy as a 'deferred Roth contribution strategy.' Deferred Roth is better than no Roth, but Roth now is still better than Roth deferred."
A client may only divorce his second wife instead of filing an annulment to qualify for Social Security survivor benefits on his first wife who passed away before he remarried, according to this article on USA Today. “Generally, a claimant for widow(er)s or surviving divorced spouse’s benefits must be unmarried in order to be entitled. Entitlement can begin with the month the subsequent marriage terminated regardless if the marriage ended by death or divorce,” according to the Social Security Procedure Manual.
When planning for retirement, clients should consider setting up financial safeguards against a possible cognitive decline, according to this article on Money. A report from Boston College's Center for Retirement Research shows that more than 50% of seniors experience dementia or cognitive impairment when they reach their late 80s. To prepare for this risk, clients should allow family members to know their personal finances, get professional help and create a financial plan for late retirement.
Clients have the option to use funds in their retirement accounts to invest in real estate and other alternative investments, according to this article on Forbes. Most retirement savers who invest in real estate use their self-directed IRAs, as few 401(k) plans include real estate as an investment option. Read the article to learn tips for clients who are considering this option, as the Internal Revenue Service has restrictions with regard to retirement account investment.
