It’s a critical time to protect retirees and seniors’ finances

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Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about

It’s a critical time to protect retirees and seniors’ finances. Here’s why
Retirees are advised to take the necessary steps to protect their finances, as the current crisis makes them more socially isolated and prone to make poor financial moves, according to this Forbes article. Scammers are likely to seize the opportunity to prey on the elderly, according to the article. “Right now, many older adults aren’t getting their usual visits from relatives and friends. So, they’re lacking those extra eyes and ears that help keep them safe from predators,” an expert says.

Should clients stop funding their retirement savings because of COVID-19?
Clients should continue setting aside money in their 401(k)s and IRAs amid the coronavirus crisis if they already have an emergency fund, according to this article in Motley Fool. Those who have not saved for unforeseen expenses are advised to defer their retirement contributions to build cash reserves. In this time of crisis, people need to have an emergency fund equivalent to at least six months' worth of living expenses.

Is pausing contributions to SEP IRAs a good move?
Self-employed taxpayers who are saving in a SEP IRA will be better off taking advantage of the July 15 filing extension and deferring the tax-deductible contributions amid the sudden economic slowdown, according to this article in The New York Times. This will give them the opportunity to raise a cash reserve to cover their expenses during these hard times, says a financial planner. “Right now cash is king.”

This is how clients get fast cash during the coronavirus pandemic
Americans may want to consider filing for unemployment insurance, take on another job and even dip into their taxable accounts to improve a cash flow during the coronavirus crisis, according to this article in CNBC. They may also tap their home equity, consider margin loans against the value of taxable investments and get a tax-free loan against their cash-value life insurance, according to the article. Retirement accounts are also a possible source, but premature distributions could trigger income taxes plus penalties.

Morningstar finds that active managers have left a lot to be desired.
March 23

How clients can leverage 0% interest rates in a self-directed IRA
Clients who consider owning real estate to take advantage of low interest rates can hold these investments in a self-directed IRA, according to this article in Yahoo Finance. Clients who consider this strategy are advised to hire a qualified custodian, take due diligence and avoid self-dealing. They are also advised to watch out for the unrelated business income tax and other tax triggers.

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