Our daily roundup of retirement news your clients may be thinking about.
Procrastinating on retirement savings? Here's what it might cost you
Clients are advised to avoid procrastinating when building their nest egg, as delaying could mean a bigger savings rate in the years leading to retirement, according to this article on Motley Fool. For example, clients aged 35 have to set aside 11.69% of their pay to keep up with those in their 20s socking away only 6% of their salary, based on calculations by Financial Engines. Index funds are a good investment, as they are less expensive than other options. Clients with earned income should consider setting up an IRA if they have no access to an employer-sponsored retirement plan.
Don’t let volatility rear-end your retirement plans
Investors are advised to take a pro-active approach to managing volatility to minimize its impact on their retirement plans, writes an investment advisor on Kiplinger. To do this, they should know how diversified their retirement portfolio is, consider alternative investment strategies, and use an investment approach that is both active and passive at the same time, writes the expert. "Make sure you’re working with an advisor who uses products and strategies that can keep you safely on a course to outpace inflation, avoid high taxes and reach all your retirement goals."
Ask Larry: Will early retirement mean lower widow's benefits?
A client who opts to file for Social Security retirement benefit early can still expect an unreduced widow's benefit in the event her husband pre-deceases her, according to this article on Forbes. However, she will be collecting her retirement benefit at a reduced rate while both of them are still alive, and the amount will be the same even if the husband applies for his own retirement benefit and she is entitled to an excess spousal benefit.
An important retirement account deadline is coming up. Here's what to know
Retirees who reached 70 1/2 last year should ensure that they take their first required minimum distributions from their tax-deferred retirement accounts, such as 401(k) plans and IRAs before April 1, according to this article on Money. Those who fail to take the mandatory distribution by the deadline will face a penalty equivalent to 50% of the RMD amount. "Make sure your RMD is calculated correctly and ask the custodian of the account to help. Not getting that RMD out is so costly that you never want that to happen,” says an expert.
Yes, it’s true: Older people depend on Social Security
Studies have found that more retirees are depending more on their Social Security benefits for income, confirming the important role of the program to retirement security, writes Alicia H. Munnell, director of the Center for Retirement Research at Boston College, on MarketWatch. "Social Security is a very important source of retirement income and that needs to be recognized in any debate about the program’s future."