Our daily roundup of retirement news your clients may be thinking about.
Some employers hit reset button on workers retirement-plan holdings
A number of employers have made target-date funds a default investment option in their retirement plans, according to this article in The Wall Street Journal. The state of Illinois, for example, re-enrolled its employees into such a fund unless they refused, and the outcome has been an improvement in the average employee's portfolio diversification. Before, as much as 29% of the plans assets were in one relatively risky asset class: small-cap value stocks. But after the re-enrollment, it fell to 5.2%, while the percentage in the target-date funds soared to 60% from 11.9%, says William Atwood, executive director of the Illinois State Board of Investment. "This was an aggressive strategy we employed to move the plan's allocations" to a more diversified portfolio of investments, Atwood explains. --The Wall Street Journal
Save for retirement -- or pay for children's college?
A study by the LIMRA Secure Retirement Institute has found that many older people are torn between saving for retirement and helping pay the cost of their children's college education, according to this article on CBS Moneywatch. Clients need to find ways to ensure they retire with enough savings to cover their needs in retirement while putting their children through college. They can reduce their college debt by sending their children to a community college for two years and transfer them to a university, or to a public university instead of a private school. --CBS Moneywatch
Consumer watchdog weighs in on reverse mortgages
Reverse mortgage is an option for cash-strapped retirees to help cover their living costs and other expenses. But the way these loans are advertised sends a wrong message to seniors, according to the Consumer Financial Protection Bureau. The ads make people believe that those who take this mortgage can stay in their homes and secure their finances as long as they live, Richard Cordray, the bureau's director, said in a statement. "Incomplete or inaccurate information in an ad can cause older Americans to make the wrong choice that jeopardizes their financial security. They could run out of money for their day-to-day expenses or they could even lose their homes." --CNBC
Why clients can't convert nondeductible IRA into Roth IRA
Clients who hold multiple IRAs need to know that the tax code aggregates all these accounts when determining the taxes after converting a portion of IRA to a Roth account, according to this article on MarketWatch. When determining the tax, the pro rata rule applies, which requires that the tax be based on the portion of deductible contributions only, excluding the portion of nondeductible contributions. For example, if the aggregate value is $100,000 and the nondeductible contributions amount to $20,000, then 80% of the amount converted to a Roth account will be subject to tax. --MarketWatch
5 reasons to consolidate retirement accounts
Retirement savers are advised to consolidate their IRAs and 401(k) assets with their previous employers to save on custodial fees, according to this article on Forbes. With a consolidated, single retirement account, record keeping will be more manageable and investments will be more coordinated. Calculating required minimum distributions will be much easier and estate administration will be simpler if clients opt to put their IRAs and old 401(k) assets in one place. --Forbes
- Are Longevity Annuities Ready for Prime Time?
- 5 Ways to Fix Social Security
- Social Security: Stronger Than Most Advisors Realize
Register or login for access to this item and much more
All Bank Investment Consultant content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access