Our daily roundup of retirement news your clients may be thinking about.
Insurance against outliving your retirement savings
Workers need to weigh their options carefully before buying longevity insurance in their IRA and 401(k) plans if they want to address the risk of outliving their assets, according to an article in The Wall Street Journal. While such an insurance policy offers benefits, there are also disadvantages. Clients are advised to defer Social Security benefits and buy longevity insurance only if the delay in benefits won't result in adequate retirement income. They should also buy such coverage from insurers with triple-A or double-A ratings of claims-paying ability, and make sure the purchases do not exceed their state guaranty fund's coverage limit to protect their investments. --The Wall Street Journal
When it's smart -- if ever -- to tap your retirement accounts
Clients are advised against taking withdrawals from their IRA or 401(k) plans to avoid penalties. But there are some cases when there are no penalties. For example, if they intend to buy a house or pay medical bills, there may not be any penalties, according to this article in U.S. News & World Report. They will also pay no penalties if they use the withdrawn money to purchase health insurance or pay education expenses. There will also be no withdrawal penalties if clients take the distribution in equal payments, or they lose their jobs or become permanently disabled. -- Yahoo Finance
A 401(k) rollover checklist
Workers who are thinking of what to do with their 401(k) money from previous employers may take the following steps. First, they should check the account value and decide whether they keep it inside a 401(k) with previous or new employer, or roll the money into an IRA. Then, they should evaluate the quality of 401(k) options if they decide to keep their assets within the plan, or look for the right IRA provider in case they decide to roll the money over to an IRA. If the clients hold traditional 401(k) assets, they may think of converting these assets into Roth. Finally, they should execute whatever decision they have and decide on how they will allocate their assets. --Morningstar
5 simple reasons why you shouldn't retire at 62
Workers need to understand the outcome if they decide to retire when they reach 62, according to Motley Fool. They can expect lower Social Security benefits and will need to have health insurance for three years as Medicare only becomes available when they turn 65. Early retirement will also mean smaller spousal and survivor benefits for their families, and may prevent them from enjoying the period of receiving optimum earnings they can have in their careers. Clients may retire before the age of 62 provided they have adequate retirement savings to back them up through their golden years.
Retirees fare poorly in pension advance deals
Regulators and consumer activists warn that retirees are on the losing end if they decide to sell their future pension payments to pension advance firms for a lump sum of cash, according to Kiplinger. The effective interest rate on these transactions could be as high as 46%, and the deals would require pensioners to buy life insurance policies and identify the pension advance firm as beneficiary. Such deals can also be risky for investors, as courts have found the transactions invalid because federal laws do not allow the "assignment," or transfer, of certain types of pensions. --Kiplinger
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