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Common tax surprises for surviving spouses

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Common tax surprises for surviving spouses
Couples engaged in retirement planning should account for survivorship income – that is, the benefits that a surviving spouse collects after the death of a spouse, according to this article on MarketWatch. A surviving spouse will either receive his or her own Social Security retirement benefit or the survivor's benefit, whichever is higher. He or she may move to a higher tax bracket, however, because of a sudden increase in taxable income, which could mean higher Medicare premiums and a bigger taxable portion of their Social Security benefits. To reduce taxable income, couples may want to do a full or partial Roth IRA conversion or get life insurance to cover the hefty taxes from their survivorship income.

Retirees, rebalance your portfolio even as this bull market keeps running
Retirees are advised to rebalance their investment portfolio despite the bull market conditions, according to this article from Kiplinger. That's because a continued market rally could mean growth in certain areas that their asset allocation could result in unnecessary outcomes when the market slows down. Clients should focus their rebalancing efforts in tax-advantaged accounts, as transactions in taxable accounts trigger a tax liability.

My 401(k) is making only 2-3%, so why not borrow from it and pay it back at 5%?
Taking a loan from a 401(k) plan and using the money to try to get a bigger return that the 2% to 3% that the plan offers may not be a feasible idea, according to this article from the Los Angeles Times. That's because the return is highly improbable, given the existing market conditions. 401(k) participants who get very low returns are advised to check the investment fees and other costs in the plan. They should also avoid borrowing from the plan, as it prevents them from gaining from the market's growth, thereby reducing their overall returns.

How to gauge the chances of a phased retirement
Data from the TransAmerica Center for Retirement Studies show that nearly 75% of companies say that many of their workers intend to continue working past the age of 65 or to never retire at all, according to this article on CNBC. However, only nearly 40% of these companies offer flexible schedules to their employees, according to the data. "Employers are aware that many workers plan to work past 65 and fully retire at an older age, but that awareness has to yet to translate into action," says TCRS President Catherine Collinson.

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