How to help your clients’ retirement savings last
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How to help your clients’ retirement savings last as long as they live
Pre-retirees must diversify their investment portfolios to mitigate the risk of sequence of return, a financial advisor in Kiplinger writes. Clients are also advised to develop a sustainable withdrawal plan, tap their home equity to create an income stream and consider investing a portion of their savings into an annuity, according to the expert. It pays to have a cash reserve that can cover six to 12 months of expenses to avoid withdrawing their investments during a market slowdown.
Is there ever a reason clients shouldn’t open a 401(k)?
Although retirement savers can use IRAs as an alternative to 401(k)s, most clients are better off contributing to their employer-sponsored plans, according to this article in MarketWatch. That's because 401(k)s have higher contribution limits compared with IRAs, and these pretax contributions can help reduce your clients' tax bills, according to the article. Those who choose an IRA need to be consistent with their contributions. “Don’t plan to make IRA contributions on an ad hoc basis because doing so could make it less likely that you will save regularly," an expert says.
Retirement planning mistakes that waste clients’ money
Failing to set up a retirement plan, not knowing the amount of savings needed to secure retirement and not raising the savings rate are among the many costly mistakes that clients make, according to this article in Yahoo Finance. They often fail to take advantage of tax-saving strategies, such as contributing to retirement accounts and investing variable annuities, according to the article. Cashing out 401(k) assets before retirement is another costly mistake that clients make, as this triggers income taxes and tax penalties.
5 ways to adjust your clients’ retirement planning annually
Retirement investors are advised to remain calm amid the market volatility and instead engage in an annual assessment of their retirement plans, according to this article in Forbes. To do so, clients will need to rebalance their retirement accounts, make a good estimate of their Social Security and pension benefits and determine when they should retire and start drawing income from their tax-advantaged retirement accounts, according to the article. They are also advised to develop or update their spending budget and income plan in retirement and, if possible, pay down their high-interest debts.
How clients can turn a down market to their advantage
A market slowdown presents an opportunity for investors to improve their portfolios, according to Morningstar's Christine Benz. "If you have tax-sheltered assets, traditional IRA specifically — when the market goes down, that tends to be a better time to convert those traditional IRA assets to Roth," she says. "Because the taxes that you'll owe are based on that lower balance."