Our daily roundup of retirement news your clients may be thinking about.
Why reverse mortgages are worth a look
A reverse mortgage can be a good option for retirees to tap into their home equity and create an additional income stream, according to this article on Kiplinger. They owe no income tax on the payouts and they can claim a tax deduction on the accrued interest upon mortgage repayment. They can also use the money from a reverse mortgage to pay the tax bill from converting their 401(k) and traditional IRA into a Roth account to prevent any increase in taxable income when they start taking required minimum distributions and subsequently to avoid moving to a higher tax bracket.
Why I’m not changing my portfolio after the election
An investor writes on MarketWatch that he has no intention to change his portfolio following the outcome of the election. The stock market's behavior during the election week is not a good basis to predict the market's direction over the next four years, the investor explains. "Between now and November 2020, the identity of the president will be only one of tens of thousands of facts, events, reactions and forecasts that will make the market go up and down."
Clients think they're prepared for retirement? Ask these 6 questions
Many baby boomers are not ready to retire and should make smart financial decisions to improve their retirement prospects, according to this article on Washington Post. For example, they should consider downsizing their expenses, create different sources of retirement income, and develop a plan that provides steps to ensure their retirement income can cover anticipated expenses. Baby boomers should also address their debts, keep their mortgage at an affordable level after they retire, and assess how adding a few more years to their peak-earning years could improve their retirement.
Why clients' retirement savings may be a pipe dream
Many clients underestimate their life expectancy and plan for retirement with a shorter time horizon, which is a serious mistake for financial advisers, according to this article on Fox Business. “I would rather plan for you to live longer than to plan for a shorter time period and [see you] run out of money during retirement,” says financial advisor. “Once you retire, you are relying on your savings and investments to live off of and if there is a risk of that income stream not being enough to last you through your lifetime, it can put you in a dire situation."
6 end-of-year retirement planning tips that will save clients money
As the year comes to an end, there are some things that retirement savers should consider doing to set aside more money for retirement and save on taxes at the same time, according to this article on U.S. News & World Report. For example, maxing out their 401(k) contributions and taking advantage of catch-up contributions may boost their retirement savings, reduce their taxable income, and qualify them to claim the saver's tax credit. Contributing to an IRA will also make them eligible for a tax deduction. Retirees who have reached 70 1/2 should take their first required minimum distribution from their tax-deferred accounts to avoid a hefty tax penalty, and they may consider donating their RMD to a qualified charity to reduce their taxable income and tax bill.
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