Social Security underpays thousands of widows and widowers: Retirement Scan
Our daily roundup of retirement news your clients may be thinking about.
Social Security underpays thousands of widows and widowers
An audit report from the Social Security Administration Office of Inspector General shows that 82% of beneficiaries who qualified for survivor benefits and their own benefits were not informed that they could opt for a restricted application and boost their benefit, according to this article on CBS Moneywatch. This means that widows and widowers aged 70 and above lost about $131.8 million, based on the audit's estimates.
Should you make IRA contributions after 65?
Seniors are not allowed to contribute to an IRA if the money is not from an earned income, according to this article on Morningstar. This also means that they cannot make Roth IRA contributions using their required minimum distributions from a traditional IRA. Older workers who qualify to contribute to an IRA should consider such an option, as the tax savings could still more significant than putting the money in a taxable account despite a shorter holding period.
Roth IRA: Convert now or pay later?
Clients are in a better position to do a Roth IRA conversion under the new tax law, according to this article on Kiplinger. The new law lowers the tax rates and subsequently reduces the tax bite on the converted amount. However, lower tax rates are likely for the short term and lawmakers may raise the rates because of rising debt.
5 ways to avoid paying taxes on your Social Security benefits
Some retirees owe taxes on up to 85% of their Social Security benefits if their combined taxable income exceeds a certain threshold, according to this article on Yahoo Finance. To reduce their taxable income, seniors may want to take tax-free distributions from their Roth accounts and donate their required minimum distributions directly to a charity. They may also want to shift to tax-friendly or no-tax investments, such as index funds.
Retirement may be hazardous to your health
A study suggests that seniors tend to be healthier and live longer if they continue working past the retirement age than leaving the labor force for good, according to this article on MarketWatch. However, the perception of being healthy is subjective, says an expert, adding that “[s]ome workers may still feel healthy but have sensed some nonspecific declines that prompt them to retire earlier than others.” Moreover, “people who are still working after age 65 are generally in less physically-demanding jobs” but are “healthier emotionally and physically than their counterparts who retired.”