Can clients save their way out of retirement trouble?
Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about.
Can clients save their way out of trouble?
A five percentage point increase in savings for workers with 401(k) access could lower the National Retirement Risk Index to 47% from 50%, analysis of data from the Fed's Survey of Consumer Finances shows, an expert writes in this MarketWatch article. Raising the assumed retirement age to 67 from 65 could dramatically reduce the percentage of families at risk, says Alicia H. Munnell, director of Boston College Center for Retirement Research. "Combining the increase in the retirement age with a five-percentage-point increase in the contribution rate results in a dramatic decline in the NRRI for all ages," she adds.
4 ways to manage sequence of returns risk
Seniors can reduce the sequence of returns risk that occurs in the early part of retirement by limiting their withdrawal rate, according to this Forbes article. They can also minimize this risk by tapping their home equity, creating a bond ladder or using a term annuity as an alternative to a bond ladder. Clients may also opt for the bucketing approach, which will allow them to separate their assets into different buckets earmarked for different time periods.
How clients can overcome one of the biggest retirement hurdles
Clients are advised to put loan repayment ahead of retirement saving if it is high-interest debt, according to this article in Yahoo Finance. If not, clients should continue contributing to their 401(k)s while repaying outstanding debt, especially if their employer offers a match. “A lot of younger individuals must be scared and nervous to get started. The funny thing is the best time to invest was five years ago and the second-best time is today,” an expert says.
A third of workers can't answer this basic retirement question
Nearly a third of workers do not have an accurate estimate of the amount of their retirement savings, a report from Wells Fargo shows in this article in Motley Fool. This can be a mistake, underestimating can prevent them from knowing whether they are on track in securing a lasting retirement. Retirement calculators can be a simple tool to help clients determine whether they have saved enough.