Our daily roundup of retirement news your clients may be thinking about.
Despite the importance of Medicare to most clients' health care in retirement, many people don't know very much about how the program works, according to this article on Motley Fool. Here is a refresher to help educate your clients. In general, most workers have to work about 10 years in order to qualify for Medicare. A worker's spouse can qualify on the worker's record even if the spouse doesn't have enough credits. People can avail themselves of Medicare's full benefits if they have earned 40 work credits, while those who have earned less can still sign up but will have to pay a premium for hospital coverage, according to the article. Medicare has four coverage plans, three of which offer traditional coverage (which are Parts A, B, and D), and an Advantage plan, which is Part C. Those who want to enroll in Medicare should sign up on or before the deadline to avoid a penalty, and they should know the rules if they carry other types of healthcare insurance or want to change their coverage options. --Motley Fool
As the United States faces a decline in birth rates, dwindling retirement savings and rising national debt, retirement is looking less attractive for the younger generation, according to this article on MarketWatch. Written in the form of a letter from an aging man (who entered high school in 1948), to his grandchildren, it elaborates on the social and demographic trends that have changed the face of retirement over the years. One such trend is the falling savings rate, according to the article. The letter writer says his aging generation saved an average of about 10% of their after-tax income, down from over 20% during World War II. It fell to 1% in 2005 before rising to about 5% now. Even so, it says that about a third of boomers couldn't pay for a $400 car repair without taking out a loan, and half of them couldn't come up with $1,000. It also espouses "smart investment decisions," such as picking low-cost stock index funds, as a way to help secure the golden years. --MarketWatch
In a low-return environment, retirement savers should either take more risk to boost their returns or scale back on spending to free more money to invest for their golden years, according to this article on Yahoo Finance. "Some people prefer to turn down the spending knob and conserve and contribute a bit more," says an equity strategist. "Sometimes you don't want to [turn down spending], so investors have to stomach a little bit more risk to meet their goals." --Yahoo Finance
A client who intends to wait until his full retirement age to file for Social Security spousal benefits will receive 50% of his spouse's retirement benefit at her FRA, according to this article on USA Today. However, the spousal benefit will be lower if the client opts to collect the benefit before reaching his FRA. Those who file for spousal benefit at FRA have the option to use a restricted application strategy, which will allow their retirement benefit to accrue delayed credits until they turn 70. --USA Today
Unlike a 401(k) participant, a public-sector employee will not face any penalty if he decides to retire and tap into his 457(b) plan before reaching the age of 59 1/2, according to this article on Money. However, the 457(b) participant will be better off keeping the money in the plan for more years to allow the funds to keep growing. Another option is to roll over the money into an IRA, where asset allocation will be easier and estate planning is possible, says an expert. “There are plenty of reasons to move to an IRA, but there is no reason to rush.” --Money
