Clients should expect the unexpected in retirement

Retirees couple retirement by Bloomberg News
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Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about

Clients should expect surprises in retirement
Contrary to expectations, having a busy lifestyle is one of the many big surprises that seniors can expect in retirement, according to this article in Kiplinger. Many seniors also found the transition to retirement to be difficult, according to the article. While some retirees have seen a substantial increase in spending, many others are enjoying financial freedom. “We have more than enough money to enjoy exactly the retirement life we envisioned,” a retiree says. “Years of financial planning, maxing out the 401(k) and paying off all debt before retirement have given us a freedom that is truly exhilarating.”

Are your clients retiring into a shaky market? They should think long term anyway
Despite the recent volatility in the stock market, new retirees are advised to remain invested in stocks to ensure that they will have the returns to cover a long retirement horizon, according to this article in The New York Times. Selling depreciated investments in the early years of retirement would also force them to lock in substantial losses. To avoid selling stocks, retirees are advised to work longer, tap income from other sources and adopt a more conservative asset allocation. “If you have some flexibility with your spending, just being able to cut a little bit can go a long way to help improve how long your portfolio will stick around for,” says an expert.

These states may be coming for clients’ Social Security benefits
Seniors should know that they might owe federal taxes on their Social Security retirement benefits, according to this article in Motley Fool. Up to 85% of their benefits will be subject to federal taxes if their modified adjusted gross income plus half of their benefits exceed a certain threshold. Retirees who live in Colorado, Connecticut and 11 other states may also face state taxes on their Social Security benefits, according to the article.

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February 4

Why a Roth IRA conversion can make sense in a down market
The recent market slowdown makes a good case for investors to convert their traditional IRA assets into a Roth to boost after-tax income in retirement, according to this article in CNBC. That's because while clients have to pay income taxes on the conversion, the tax bill will be smaller now as stock prices have declined and tax rates are considerably lower under the 2017 tax law. “You want the best deal, like when you buy anything. You want it on sale and at the lowest price,” says CPA and retirement expert Ed Slott.

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