Tax debate highlights Americans’ poor savings rate

Register now

Tax debate highlights Americans’ poor savings rate
The tax debate puts retirement plans in the spotlight, revealing the bad state of an average person's retirement account, according to this article on CNBC. Although data from Vanguard shows that the total value of investments in defined contribution plans reached a record high in 2016, the individual balance is not enough to secure retirement. According to Vanguard, some 94 million Americans have defined contribution accounts, with overall assets exceeding $7 trillion. That sounds like a lot of money, but when you drill down, a bleaker picture emerges. The median value of a 401(k) account for someone 65 and over is about $60,000. Moreover, the other two "legs" of the retirement stool—Social Security and pensions—are increasingly under pressure, the article notes.

Why retirees should set limits on financial largess with family
Seniors should set limits on helping their children financially, as giving assistance could hurt their retirement prospects, writes an expert for The Wall Street Journal. "Advisers can help clients steer clear of the dangers of overcommitting to their children and other family members by setting clear boundaries around their giving," writes the expert. "Take, for example, children who ask their parents to co-sign a mortgage because they lost a job. Such assistance can leave retirees financially insecure, especially when trying to support a young family whose expenses can keep growing,” the expert writes.

This couple went from workaholics to early retirees in six years
A couple is poised for retirement six years after they made a serious decision to save for their golden years, according to this article on MarketWatch. "We first started thinking about saving more, and the complexities have layered in over time. We had a head start on 401(k)s ... Then we started putting money into index funds," says the wife. " And since we’re financially conservative we started thinking about contingencies. We wanted to pay off our house; that gives us the ability to downsize if we needed to free up cash or rent it out – that’s not our first choice, but it helps me sleep at night.”

Where to turn when bonds aren't the investment they used to be
Investors are looking for alternative investments to bonds, as rising interest rates make bonds’ market value decline, according to this article on Kiplinger. These options include annuities, particularly a fixed-index annuity product that allows investors to gain from market-linked interest credits and have steady source of guaranteed income in retirement. Clients who consider this annuity are advised to consult a tax adviser to know the tax consequences of investing in this product.

25% of Americans say they'll never be able to retire – 3 signs you might be one of them
Many Americans claim that they will not be able to retire, and clients could be one of them if they failed to start saving early, according to this article on personal finance website Motley Fool. Clients are unlikely to retire if they expect to depend on Social Security solely for their needs. Workers who do not make the most of their employer-sponsored 401(k) plans are also at risk of not being able to retire.

For reprint and licensing requests for this article, click here.
Retirement readiness Retirement income 401(k) Social Security