Should clients convert to Roth if their income is rising?
Should clients convert to a Roth if their income is rising?
A couple who expects to earn a bigger income in the coming years is advised to convert a portion of their traditional IRA into a Roth account now while they are in a lower tax bracket, according to this article on MarketWatch. A Roth conversion is subject to federal income tax, and converting would mean a bigger tax bite in the future when they move to a higher tax bracket. Although a Roth conversion could save them money on taxes in the longer run, the couple should ensure they have money outside the IRA to pay the tax bill on the converted amount to avoid offsetting the gains from the conversion.
A moderate ETF bucket portfolio for retirement
Exchange-traded funds are a good investment option for clients who adopt the bucket portfolio approach, according to this article on Morningstar. Since retiree investors put a big portion of their assets in low-returning holdings, investing in low-cost investments can help boost their overall portfolio yields. Compared with other index funds, equity ETFs are more tax-efficient, which is a boon for retirees whose investments are mostly in taxable accounts.
Baby boomers are causing a debt crisis. Here’s how they can navigate it
A report from the Congressional Budget Office shows that the federal debt could balloon 77% to 150% of the gross domestic product by 2047, according to this article on Fortune. The alarming increase could be attributed to Social Security and Medicare, so lawmakers are likely to revamp these programs to prevent a worst-case scenario. One of the changes could be a reduction in Social Security benefits, so pre-retirees should start preparing for this possibility by incorporating it in their retirement plan.
Here's how much the average young family has saved for retirement
Although a report from the Economic Policy Institute reveals that the average family between 32 and 37 years old has $31,644 in retirement savings, the mean savings for these families less than $1,000, indicating that many households face bleak retirement prospects, according to this article on CNBC. As such, families should start saving as early as they can, and consider an IRA if they have no access to a 401(k) or a workplace retirement plan. They should consider saving at least 10% of their pay and automating their contributions, increasing their savings rate over the years.
5 considerations when developing a retirement income game plan
Retirement savers should account for inflation when creating a strategy to tap their investments for income in the golden years, according to this article on Kiplinger. They should also factor in taxes and determine the variable portion of their retirement funds. Clients need to separate fixed expenses from variable expenses and consider hiring an expert to help them develop an effective retirement income plan.