Don't let election volatility sway clients' 401(k) investments
The expected volatility following the U.S. presidential election should not prompt investors to make any changes to their retirement savings plans, according to this article on CNBC. Instead, investors should take market volatility as an opportunity to engage in year-end tax planning that includes strategies such as tax loss harvesting. "It's always a good time to prune your portfolio," says a certified financial planner.
Inherited IRAs come with RMD strings attached
Non-spouse beneficiaries of an IRA are required to take distributions in the year after the account owner dies, according to this article on USA Today. They face a 50% penalty of the distribution amount for each year they fail to withdraw the funds, but may get a 50% waiver from the Internal Revenue Service "for good cause," says an IRA analyst. Distributions from inherited IRAs are taxable, so these beneficiaries can expect an increase in their tax bill.
Are there special tax breaks for retirees?
Clients can expect special tax breaks when they hit retirement age, according to this article on Motley Fool. They are entitled to a higher standard deduction, higher medical tax deductions, as well as a special credit if they belong to the low income group or have permanent disability. Roth investors also can make tax-free distributions, while those on Social Security can expect state tax exemptions depending on the states where they live.
Before packing your bags to retire abroad
Retiring to a foreign country with lower cost of living is an attractive option for clients who have limited retirement sources, according to this article on CBS Moneywatch. Those who consider this option should ensure that their health care needs will be covered, as Medicare does not include medical expenses incurred abroad. Before moving overseas, pre-retirees should also make sure that they have access to their retirement benefits, they factor in all possible needs, including unexpected return trips for family emergencies, and they have a plan for the entire duration of their retirement.
Ask Larry: Should we both file and suspend to get more Social Security?
A client and his wife who reached their full retirement age cannot file for and suspend their Social Security retirement benefits, and apply for spousal benefits from each other's record simultaneously, according to this article on Forbes. The file and suspend deadline under the old rules was April 29, 2016, which means that they could collect a spousal benefit only if they are receiving their own retirement benefit. If one spouse has a FRA benefit that is less than 50% of the other spouse's FRA benefit, the recommended strategy is for the lower-earning spouse to file for the retirement benefit, to allow the other spouse to file for a spousal benefit and delay his or her own benefit until the age of 70.
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