Our daily roundup of retirement news your clients may be thinking about.
The pension-style retirement product you should know about
401(k) participants can create a pension-like source of retirement income by using a portion of their assets to buy a longevity income annuity, according to this article on MarketWatch. An LIA is a deferred annuity product that provides guaranteed lifetime income for retirees. Based on a paper by National Bureau of Economic Research, “[e]ven in the current low-interest-rate environment, a deferred single-life annuity purchased at age 65 for a male costing $10,000 can generate an annual benefit flow from age 85 onward of $4,830 ($3,866 for a female) per year for life.”
3 IRA rules to live by
Knowing the IRA rules is key for clients to make the most of the account and enhance their retirement prospects, according to this article on Motley Fool. For example, clients can contribute the maximum amount to a Roth IRA if their income does not exceed a certain limit, while traditional IRAs' income limits apply only to tax-deductible contributions. Clients may also consider using both IRA types, strategically holding appropriate assets in these accounts to optimize the tax benefits and get the best results.
Don’t let hidden investment fees hijack your retirement
Clients have to lessen the investment fees that they pay in their retirement accounts, as these costs could erode a substantial amount of their savings in the long term, according to this article on Kiplinger. To minimize these costs, they are advised to identify the adviser fees and investment costs and consider annuitizing a certain portion of their savings, as some annuity products charge no or very low fees and are transparent about these costs. Clients may also want to seek guidance from a new professional who is very knowledgeable about financial products to give them a fresh perspective on retirement saving.
Why Americans aren’t saving enough for retirement
A study by Bankrate showed that while more Americans are confident with how much money they have saved for retirement, 21% of workers are not contributing to their retirement account, according to this article on Fox Business. The study also found that just 25% of the respondents are socking away more than 10% of their income in these accounts. “If you don’t make saving a priority it’s not going to happen,” says a financial analyst with Bankrate. “The beauty of a 401(k) is this money is payroll deducted. It comes out before you have a chance to even think about it.”
What you need to know about saving for retirement in your thirties
Retirement saving can be very challenging for clients when they reach their 30s, as this is the time that they face "life transitions," such as raising a family and buying a home, according to this article on Forbes. However, this is also the time to ensure that their retirement savings plan is on track to prepare for many uncertainties in the future. While clients in their 30s face many financial challenges, it pays to start saving even with a small amount and leave it to grow over time through compound interest, some experts say. Read the article for more retirement tips for these clients.
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