Our daily roundup of retirement news your clients may be thinking about.
Taxpayers need to know the rules that apply to IRA inheritances, as a lack of understanding could result in an unfavorable tax outcome, according to this article on CBS Moneywatch. A son who inherited an IRA from his father shared the distribution with his two siblings but later found that he had to include the entire amount to his gross income and pay the appropriate tax. This could have been avoided if the parent had named all his children beneficiaries of the account and if the son knew the rules before taking any distribution from the inherited account. -- CBS MoneyWatch
The Internal Revenue Service and the Treasury announced in July that they are working to amend regulations to stop companies from giving a lump-sum option for retirees to "de-risk" their defined benefit plans, a move in the right direction, writes Alicia H. Munnell, director of Boston College's Center for Retirement Research. While the "de-risking strategy" would benefit companies, it "is generally bad for the retirees," Munnell writes. "Retirees opting for a lump sum immediately lose the advantages of lifetime income and become responsible for their own investments." -- MarketWatch
A couple intends to retire at age 33 and is preparing by saving aggressively and spending on a very tight budget, according to this article on Forbes. Excluding mortgage, their expenses in 2014 stood at only $13,000 while saving as much as 71% of their earnings. "We got there by truly focusing on every single line item. No expense is safe," the wife says. "The only way to figure out what was really necessary for us to be happy and what's superfluous was to cut things out then reassess," the husband adds. -- Forbes
Clients can determine their Social Security retirement benefits according to the number of working years covered, their annual income and the age they decide to start receiving benefits, according to this article on Kiplinger. The 35 highest paid years will be the basis for the size of your benefit and clients can start claiming retirement benefits as early as age 62, with the value of the benefit rising if they opt to take the benefit at an older age. Retirees born from 1943 to 1954 will have the full retirement age of 66, while the FRA for those born in 1960 or later rises by a few months every year until it reaches 67. -- Kiplinger
The government can fix Social Security's financial woes if they adopt the Purple Social Security Plan, writes Laurence Kotlikoff, an economist at Boston University. Under the plan, the current system would be frozen and all benefits owed will be paid off, while workers would contribute 8% of their salary to a personal security account and share their contributions with their spouses, Kotlikoff writes. All assets would be invested in a global market-weighted index of stocks and bonds and a mechanism will be in place to protect the investments from losses. "Adopting the Purple Social Security Plan ... would eliminate our fiscal gap and provide our children with an economic future far different and far better than what they now face," he explains. -- CNBC
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