Obamacare repeal may birth a new retirement account: Retirement Scan
Our daily roundup of retirement news your clients may be thinking about.
Obamacare repeal may birth a new retirement account
Lawmakers have drafted legislation that would create a new type of tax-advantaged investment account as they seek to scrap the Affordable Care Act, according to this article on CNBC. The new account—the Roth health savings account—is designed to help people cover health insurance premiums and out-of-pocket medical costs. However, critics say that Roth HSAs might not be enough to cover the uninsured's health care needs. "It is being proposed as an Obamacare replacement, but it's really providing tax-sheltering opportunities rather than increasing health care coverage," says an expert with the Center on Budget and Policy Priorities.
Q&A: What's best way to convert big IRA fund into a Roth?
A retiree with $600,000 worth of assets in a traditional IRA should consider the tax implications of converting all of these assets into a Roth before making a decision, according to this article on USA Today. Transferring these assets to Roth could push her to 39.6% ordinary income tax bracket and force her to pay another 3.8% for the net investment income tax, says an expert. One tax-efficient strategy is to convert the assets to Roth in a staggered basis, the expert says. “This will significantly reduce the overall tax liability to about half of what it would be for a single conversion.”
4 ways to spot 401(k) rip-offs
Despite the required disclosure on fees, 401(k) participants may be paying hidden fees, according to this article on Forbes. To protect their retirement money from these hidden costs, clients should review their plan's annual fee notice, know the difference between direct and indirect fees, and determine the amount of these indirect fees. They should also compare their 401(k) fees with the average fees of similar-sized plans. While these indirect fees could be as low as 1% or more their account balance, such amount "can reduce your 401(k) account balance by 28 percent after 35 years!" according to Employee Fiduciary.
Commentary: This GOP bill could hurt your retirement
The House is putting the retirement of millions of American workers at risk by clearing legislation that would repeal the Department of Labor's regulations aimed at encouraging state-run retirement programs for private sector workers who have no access to employer-sponsored plans, according to this article on CBS Moneywatch. Many of these workers are women and people from minority groups, says an expert with AARP. “Right now, 55 million Americans do not have a way of saving for retirement out of their regular paycheck, and if they are unable to save enough, they run the risk of a financially insecure retirement or ultimate reliance on government safety net programs that cost the taxpayers in the end.”
Will your pension be there when you need it?
Many multi-employer and government pensions are facing underfunding woes, making many workers worried about their retirement security, according to this article on Washington Post. Two experts with the Pension Rights Center address these concerns, including federal CSRS retirement payments. "There could be efforts to try to cut federal retirement benefits... And in all likelihood, such proposals would only apply to benefits accumulated in the future, not those already earned."