The December 31 deadline for a clever Roth IRA move
Investors who have stashed big savings in a traditional IRA are advised to do a Roth conversion before year-end to make the most of the federal tax deduction for state and local income taxes, according to this article on Forbes. The tax break could disappear next year once Congress passes the tax reform bill. Converting a portion of IRA assets before Dec. 31 is one way to accelerate taxable income and claim the tax break before it is gone.
Fees rise for underfunded pensions
The U.S. Pension Benefit Guaranty Corp. is charging higher annual fees to the largest pension plans held by S&P 500 companies, according to this article on Bloomberg. That's because these plans have a funding gap amounting to $348 billion. “There’s increased awareness that an underfunded plan imposes risk on employees, it imposes risk on shareholders, and it’s getting more expensive,” says an expert.
Why debt can be so dangerous in retirement
A study by the National Bureau of Economic Research has found that the median debt-to-income ratio of clients approaching retirement increased to 0.26 from 0.01 in 1998 and 0.19 in 2008, according to this article on MarketWatch. The findings reflect an alarming situation for retirees, write the researchers. “Debt among older persons may increasingly be a factor in elder bankruptcy, and even in determining lifetime wealth sufficiency and retirement security.”
The bucket approach to retirement allocation
Retirement investors will be better off using the bucket approach to portfolio management than the income-centric approach, writes Morningstar's Christine Benz. "[T]he Bucket concept is anchored on the basic premise that assets needed to fund near-term living expenses ought to remain in cash, dinky yields and all," writes the expert. "Assets that won't be needed for several years or more can be parked in a diversified pool of long-term holdings, with the cash buffer providing the peace of mind to ride out periodic downturns in the long-term portfolio."
The new retirement: Working
Studies have found that more Americans plan to continue working in retirement to boost income, according to this article on CNBC. However, an expert says that making extra money past the retirement age can be costly. Early retirees on Social Security can expect reduced benefit payouts if they continue working while earning from a new job could mean higher taxable income and increased tax bill for older workers generating income from their retirement accounts. Older workers are advised to consult their employer if they need to enroll in Medicare Part B, as any delay could trigger a 10% penalty.
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