Our daily roundup of retirement news your clients may be thinking about.

Do young investors need bonds?
A reader asked a Morningstar expert in a Q&A article whether young investors who have no need for their money back for 40 years really needs to worry about bonds in their portfolios. Is diversification into fixed-income necessary, they asked, or can they instead simply diversify among equities? The expert agreed that an investor with several decades can overweight stocks and not worry too much about bonds. However, there was a caveat. A small allocation to bonds makes sense even for young investors, the expert said. Even for someone with four decades to go until retirement, it doesn't feel good to lose money, the expert cautioned. She reminded the reader that an investor's risk capacity (how much risk they can tolerate given their time horizon) is often different from their risk tolerance (their comfort level with short-term volatility.) "That's why a sliver of fixed-income can be helpful, as just a tiny allocation to bonds can help tamp equity volatility in a portfolio without giving up too much upside," Morningstar said. --Morningstar

Bloomberg News
Bloomberg News

This is how much longer clients need to save for retirement
A study by HSBC suggests that average workers will need more time than today's retirees to save enough for their golden years, according to this article on CNBC. Workers claim that securing their retirement means saving for an average of 30 years, or seven years more than the older workers, the study found. "We are seeing, I think, a meaningful change in how investors think about retirement," says an HSBC executive. "Awareness has risen. People have either witnessed or experienced the challenges of people around them who have retired or haven't planned effectively for retirement." --CNBC

Opinion: How saving too much can make retirement less satisfying
Some people who save enough for retirement also develop the habit of frugality over the years, and this prevents them from enjoying their golden years, according to an expert. “They end up underspending that dollar amount all through their retirement, compounding growth takes hold, the wealth starts to build up, and they die with much, much larger nest eggs and find out that not only could they have spent more in retirement, but they could have spent more during their accumulation years.” --MarketWatch

How to limit taxes on Social Security benefits
Retirees can help reduce the tax bite on their Social Security benefits by donating their required minimum distributions directly from their IRAs to a charity of their choice, according to this article on Kiplinger. They are also advised to invest some IRA or 401(k) funds in a Qualified Longevity Annuity Contract or make tax-free withdrawals from their Roth IRAs. Retirees may also consider structuring their portfolio in a way that generates just enough income for their needs, as reinvesting income will mean more taxes. Those who have provisional income that will tax 85% of their benefits should shift their focus from Social Security taxes to efficient tax planning. --Kiplinger

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