How the Fed rate hike will affect clients' retirement income
How the Fed rate hike will affect your retirement income
Although retirement investors lose from the decline in bonds' value as a result of the recent interest rate increase, they stand to gain from the rising payouts from 10-year Treasury bonds, according to this article on Money. Yield from Treasury has increased to 2.6% from 1.5% in June. “For long-term investors, if you reinvest at higher rates over time, the yields can more than make up for capital losses at the front end,” says an economist with Vanguard.
Beware the UBTI rule when investing in real estate with retirement funds
Clients are advised to be mindful of the Unrelated Business Taxable Income rules when holding real estate investments in their 401(k), IRA or other retirement account, according to this article on Forbes. Under the UBTI rules, the sale of a real estate property held within the retirement account could be treated as part of a trade or business, and should be subject to taxation. Clients could face up to 40% in tax for the transaction.
Don't bequeath trouble to your descendents
While finance experts endorse a 40%-60% bond-stock allocation in a retirement portfolio, holding a bigger allocation in equities may not be unreasonable for some retirees, according to this article on Los Angeles Times. Retirees may want to have 70% of their portfolio in equities if their retirement income from Social Security, pension and other sources is enough to cover their needs. A study has also found that clients could reduce the odds of outliving their nest egg if they increase their stock allocation after they retire.
Hispanics retire with 70% less than whites
A study from the Urban Institute shows a wide gap in household wealth between Hispanics and whites in 2012, according to this article on CNBC. U.S-born Hispanics aged 65 and older had median inflation-adjusted household wealth of $84,600 and their foreign-born counterparts had $30,900, while white households in the same age group had $280,200 in median inflation-adjusted wealth, the study found. The gap could be attributed to a drop in earnings and lack of access to retirement plans, and is highly evident among foreign-born Hispanics. "It's the case that when we have foreign-born populations, many of them came as adults and may not have spent the full 40 years working in the U.S.," says one of the researchers.
Boomerang Boom: More firms tapping the skills of the recently retired
The number of retirees who return to the workplace is on the rise as more companies are accepting former employees to work with them on a part-time basis, according to this article on The New York Times. “It’s definitely a trend. We know in many industries there are more opportunities than there is talent,” says an executive with a temporary staffing agency. Moreover, “[n]ew talent needs to be mentored as they come in the door. Previous employees mentor incoming employees.”