Mistakes retirees should avoid before a market correction

Retirees are advised to tap into their Roth accounts last to minimize hefty tax bills associated with 401(k) distributions.
Register now

Welcome to Retirement Scan, our daily roundup of retirement news.

Mistakes retirees should avoid before a market correction
Retirees should avoid the mistake of trying to time the market, according to this Kiplinger article. And if they fear a sharp downturn, seniors may want to avoid locking up their retirement accounts in long-term bonds. They shouldn't hoard cash, the article says, and they should consider diversifying with the "right" annuity.

How to prepare for retirement without a 401(k)
Workers who have no access to employer-sponsored retirement plans have the option of saving in traditional IRAs or Roth IRAs to build their savings, according to this article from Motley Fool. Contributions to a traditional IRA are pre-tax but distributions will be subject to income taxes, while a Roth IRA is funded with after-tax dollars in exchange for tax-free withdrawals in retirement. Another savings vehicle to consider is a health savings account, which also triple tax benefits — pre-tax contributions, tax-free growth on investments and tax-exempt withdrawals for qualified medical expenses.

Here’s how many people tapped a retirement plan to buy their house
Almost 10% of first-time homeowners dipped into their 401(k) plan to cover the down payment and closing costs, according to a survey by Bankrate in this CNBC article. This could be a poor decision, as clients will miss out on compounded growth on the savings. They will also face a 20% withholding tax on the distribution as well as a 10% penalty if they are below the age of 59 at the time of withdrawal.

Scammers look for vulnerability, and find it in older people
More seniors are falling victim to fraud as scammers target older people who are vulnerable, according to this article from The New York Times. A report from the Consumer Financial Protection Bureau shows that most of the victims are older than 70. “Those numbers are underreported because many times seniors are so embarrassed,” says an expert at the National Council on Aging.

For reprint and licensing requests for this article, click here.
IRAs 401(k) Portfolio diversity Roth IRAs Retirement planning Elder fraud Annuities