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Your client is about to retire – what accounts do they withdraw from first?

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Your client is about to retire – what accounts do they withdraw from first?
While retirees can start taking 401(k) withdrawals without penalties as soon as they turn 59 1/2, they may want to start drawing from their taxable account for their living expenses if this account generates interest and dividends, according to this article from USA Today. “The longer that you are able to leave the money within your 401K plan or IRA rollover — if you choose to roll it over — the longer it will remain invested on a tax-deferred basis,” says an expert. “This means that you can avoid paying taxes for longer which will result in accumulating more funds."

Why couples must plan for Social Security together
There are 567 ways to claim Social Security retirement benefits, but clients are advised to pick a strategy that will maximize their spouse's benefit on their record, according to this article on Kiplinger. While spousal benefit will be 50% of their primary insurance amount whether they file before or after their full retirement age, survivor benefits will be computed based on their actual retirement benefit. This means that men are advised to delay their retirement benefit to boost their wife's survivor benefit, as women are more likely to outlive their husbands.

What if your client doesn’t have enough saved to retire?
Contrary to how some TV commercials portray retirees, many Americans have not saved enough to secure their retirement and are facing the risk of running into financial trouble in their golden years, according to this article from the Washington Post. A couple shares how the 2008 downturn wiped away more than half of their retirement savings. “What remained of my husband’s 401(k) did not last very long after his layoff. Mine is nowhere near what we will need to retire. It’s a nightmare scenario for us. That’s why I cringe whenever I see those commercials,” says the wife.

Clients shouldn’t pay Roth conversion taxes with IRA money — here’s why
Clients who opt to convert their traditional IRA assets into a Roth will be better off paying the tax on the conversion using money from outside sources, according to this article on MarketWatch. That's because paying the tax bill using funds from IRA could mean missing out on potential tax-free returns of the money if it is transferred with the rest of the assets to Roth. Clients should consider converting only if they expect their tax rate to increase in the future.

A simple bond strategy for boosting retirement income
Bond investors who want to enhance their retirement income can avoid having too much capital in long-term investments and reduce the risk of rising interest rates using bond laddering, according to this article on Motley Fool. Among the different bond types, municipal bonds offer smaller but tax-free interest yields. Clients who opt for muni bonds are advised to hold the investments in a standard brokerage account and not inside a tax-advantaged retirement account.

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