Our daily roundup of retirement news your clients may be thinking about
This little-known 401(k) trick can open the floodgates to Roth IRA savings
A Roth IRA is a good savings vehicle for clients who expect to move to a higher tax bracket in retirement, as the contributions are taxed in exchange for tax-free withdrawals in the future, according to this article on Motley Fool. However, the Roth IRA has very low contribution limits, while those in high-income groups may not qualify to contribute to the account. One strategy to make the most of the account's tax benefits is the backdoor option, which allows clients to make nondeductible contributions to a traditional IRA or contribute after-tax money to a 401(k) plan and then convert the funds into a Roth.
No 401(k) at your client's job? How to get their boss to start a retirement plan
Clients who have no access to a workplace retirement plan may want to convince their employer to sponsor one, although the task could be daunting, writes an expert on USA Today. Before talking to their employer, clients should plan their strategy, get the support of their co-workers and research about the pros and cons of setting up a 401(k) plan, writes the expert. "Proving 401(k)s are great for the company and staff isn’t enough. You’ll also need to show why the hurdles to having one aren’t too high. Bosses are busy, so do your homework."
How financially secure is your client's retirement? Their account balance won’t tell you
The shift from defined benefit plans to defined contribution plans makes many of today's workers lose retirement security, according to this article on MarketWatch. Moreover, they are likely to have increased longevity, requiring them to save more than those that came before them had. Retirement savers are advised to consider lifetime income strategies and focus on ways to boost income from their investments.
5 tax tips for millennials - and others who want lower taxes
Millennial clients who want to reduce their tax bill have the option of maxing out contributions to their tax-deferred retirement accounts, such as a traditional 401(k) and IRA, writes a Forbes contributor. "The decision to contribute to a traditional 401(k) account versus a Roth 401(k) is complex, but generally speaking, a younger worker with a relatively low income can benefit from a Roth 401(k)," the expert says. "This is especially true if your tax rate in retirement will be higher than it is now."