Our daily roundup of retirement news your clients may be thinking about.
Retiring early despite investing mistakes
An investment-savvy retiree claims that he made several costly investing mistakes but managed to retire early, as he only incurred minor costs from these missteps, according to this opinion article from MarketWatch. "My biggest mistakes generally boiled down to becoming undiversified in some way, and not noticing that," writes the retiree. However, he adds that he made the right investing decisions, such as betting on low-cost passive index funds and other safe investments, and sticking to his asset allocation even during a market downturn.
How to save Social Security with one move
Lawmakers should consider reviving legislation by Congressman John Larson, D-Conn., that calls for an increase in Social Security benefits and funding the program into the next century, according to this article on Forbes. The bill "keeps Social Security strong through the 21st Century by ensuring millionaires and billionaires pay into the system like every American, by gradually increasing the payroll tax on workers and employers starting in 2018, equivalent to 50 cents per week cumulatively," says Max Richtman, president of the National Committee to Preserve Social Security and Medicare.
The 401(k) follies: The right and wrong way to save
Tapping 401(k) to pay off credit card debt is a smart financial decision that participants make, according to this article on CNBC. A certified financial planner recalled how a client save a substantial amount by using 401(k) money to pay off the debt. "The interest rate on the credit card was two times greater than the interest rate on the 401(k)," says the expert. "The one catch that I tell clients is that when you take a loan from your 401(k), you cannot miss a payment. If you do, the [Internal Revenue Service] will count the entire loan amount as a distribution that year and you will be taxed on it."
What's so bad about debt in retirement?
Although retiring without a debt burden improves retirement prospects, carrying a debt after leaving the workforce for good is not a bad idea, as long as it won't prevent clients from having a comfortable retirement, writes an expert on Morningstar. Clients may compute their debt/income ratio to determine whether their debt would get in the way of securing their retirement, writes the expert. "Put simply, if debt overwhelms your ability to pay other (essential) bills and save, then it's a problem... Ideally, your DTI should be as low as possible when you retire--zero, if you can manage it."
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