Our daily roundup of retirement news your clients may be thinking about.
How to guarantee an 8% return
Potential retirees have several age options to begin receiving Social Security benefits, but experts say delaying until the age of 66 to 70 instead of 62 ensures an 8% annual return on investment, according to this article from U.S. News & World Report. The most important thing to consider is that investors are able to complete the 35-year work period because benefits are based on a person's 35 highest-paid years. Shifting to a lower-paying job in the later years of a person's career will have a minimal effect on the future benefit because of the 35 -year salary criteria.
Here’s how much money clients should have saved by 30
Millennials looking to having enough for their golden years should aim to save the equivalent of their annual salary by the time their reach 30, according to this article on CNBC. That amount involves all savings, including any retirement account contributions, company matching funds, and money invest in other areas such as robo-advisers or index funds and cash savings.
I'm 60 with little saved – what do I need to do to retire?
A 60-year-old woman who earns about $80,000 annually and only has $75,000 in her retirement savings should save aggressively and look at continuing to work into her late 60s to have enough for retirement, according to this article in CNN Money. She should also consider downsizing her home or taking out a reverse mortgage. Working up to the age of 70 would also lead to a higher Social Security benefit owing to the act of postponing benefits as well as paying more Social Security payroll tax.
Why the traditional 401(k) is underrated
Clients need to consider several factors before switching from a traditional 401(k) plan to a Roth 401(k), according to Forbes. First, a traditional 401(k) lowers the client's current taxable income, while the Roth 401(k) can lower the client's taxable income when he or she retires, so clients should figure out the best time to pay their taxes, taking into account their tax rate and the numerous tax breaks they may no longer be eligible for in retirement. Clients should also remember that some of their income may be tax-free, which would lower their tax rate.
401(k) matches may have strings attached
Several pieces of information, such as the fact that employers sometimes impose vesting schedules on matches of employees' 401(k) contributions, would help investors make better decisions when investing in their retirement plans, according to MarketWatch. Clients also need to know that sometimes their employer's match only applies to 50% of some or all of their contribution, making the employer's true match lower than their own contribution. Employer matches are also not enough for a secure future in retirement, so they should consider enrolling in a retirement account and setting aside more than 10% of their yearly salary.