© 2020 Arizent. All rights reserved.

Talk to your clients about their cash

Register now

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

Talk to your clients about their cash
Cash is becoming an attractive security blanket again for investors amid rising interest rates and stock market volatility, writes Morningstar's Christine Benz. Those who intend to shift to cash reserves are advised to customize their cash allocation based on their circumstances. For example, retirees need to hold more cash than those who are still in the workforce and earning, writes the expert. "You can arrive at the right amount of cash holdings by starting with your portfolio expenditures for the year ahead, then subtracting any amounts that you'll receive from guaranteed, nonportfolio sources, such as Social Security or a pension."

How to avoid taxes on Social Security benefits
Retirees who want to minimize the tax bite on their Social Security benefits are advised to keep their provisional income below a certain threshold, according to this article on Kiplinger. The provisional income is their adjusted gross income plus nontaxable interest and 50% of the benefits. Seniors should use strategies to lower taxable income, such as drawing tax-free income from a Roth account and donating required minimum distributions directly from a traditional IRA to a qualified charity.

Turning 65 in 2019? Here's what you need to know
Seniors who reach the age of 65 this year may qualify for the Credit for the Elderly, according to this article for personal finance website Motley Fool. The credit could allow them to save as much as $7,500 if their income does not exceed a certain limit. For example, single retirees qualify for the tax break if their adjusted gross income is below $17,500 and nontaxable income from Social Security, pension and annuity does not go beyond $5,000.

How the backdoor Roth IRA contribution works
A Roth IRA is a great savings vehicle for tax-averse seniors, as the distributions from this account are not subject to income taxes, according to this article on Forbes. Some clients cannot contribute directly to a Roth IRA because their income exceeds a certain limit, but they can still sock away money into the account through a backdoor strategy. To use this strategy, clients should contribute to a traditional IRA and then convert the contribution to a Roth IRA. The conversion will trigger a taxable event, unless the contribution is nondeductible.

For reprint and licensing requests for this article, click here.