Our daily roundup of retirement news your clients may be thinking about.
The 7 most common IRA mistakes people make
Many IRA investors make a number of mistakes, such as not maxing out contributions to their accounts, paying unnecessary penalties on withdrawals, and not updating their beneficiaries after a life event such as death or divorce, according to this article on MarketWatch. Many non-working spouses also are allowed to have an IRA but fail to open this type of account. Many IRA investors also fail to designate a trust as beneficiary, take advantage of the stretch provisions for their beneficiaries, and claim their required minimum distribution when they turn 70 1/2. --MarketWatch
Company stock in 401(k)s: Proceed with caution
401(k) participants are advised to study the option of investing in their employer's stock, as such a move can be risky, according to this article on Morningstar. The performance level of shares of the firms that allocate much to their own stock in the plan is likely to be lower compared with those on a relative performance and risk-adjusted basis, according to a research report. The high correlation of the employer's stock and "human capital" is also another risk that participants face if they hold their employer's stock on the plan.--Morningstar
Here's how to fix Social Security
Removing the wage cap for imposing the Social Security tax is one strategy that the government can use to address the financial woes with Social Security, says Selene Maranjian, an expert with The Motley Fool. Using means-testing is an option to fix the system, as it would reduce payouts to retirees in high-income group while making gains to close Social Security's funding gap, says Dan Caplinger. Increasing the early eligibility age and the full retirement age is another idea worth exploring to address the funding gap, says Dan Dzombak.
--The Motley Fool
4 ways to tell if your 401(k) is a bad egg
Clients should be wary that they are paying high fees on their 401(k) plans if the plan manager doesn't provide a breakdown of the fees, according to this article on DailyFinance. Their 401(k) plan may also be too expensive if their funds' expense ratio is larger than the rest, or their assets are not invested in cheaper share classes of their funds. Another sign that their 401(k) plan is more expensive than it should is the returns are not impressive. Learn the three steps to take to reduce the plan's fees. --DailyFinance
Social Security Q&A: Should I switch from a disability to a widow's benefit at 50 or later?
A client who is receiving a disability benefit is eligible to start receiving a widow's benefit at age 50, according to this article on Forbes. While 28.5% will be deducted from the widow's benefit if she files between the ages 60 and full retirement age, there will be no additional deduction if she files before the age of 60. Since Social Security will pay only the larger benefit, the increase that the client would receive is the difference between her widow's benefit and disability benefit times the .715 reduction factor. --Forbes
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