Nearly half of baby boomers make this pricey mistake: Retirement Scan
Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about.
Nearly half of baby boomers are making this expensive retirement mistake
A new report shows 46% of baby boomers fail to adequately save for the costs of long-term care because they think these expenses can be covered by Medicare, according to this article on Motley Fool. The report, prepared by the Insured Retirement Institute, also shows that a third of seniors failed to save for long-term care because they say it was not their priority. To better plan for these expenses, clients should buy long-term care insurance coverage and contribute to a tax-advantaged health savings account.
Retirement is coming. Here’s how clients can quickly compound their wealth
Taking advantage of compounding in investment accounts is key for clients to grow their nest eggs, according to this article on CNBC. Finding success in retirement, according to experts, comes down to building a diversified portfolio, developing the right investing attitude and constructing a financial plan with a clear set of goals. For example, clients are advised to boost their tax-free income in retirement by contributing to a Roth IRA or a Roth 401(k).
Pros and cons of working in retirement
Working in retirement can be a smart move for some seniors, according to this article on U.S. News & World Report. Doing so fosters an active social life, provides extra income for travel and allows for the opportunity to continue learning. However, the option can also have drawbacks. For example, clients will face a tax liability for their income, and a portion of their Social Security benefits would be subject to federal income taxes. This could also mean moving to a higher tax bracket and a bigger tax bite when they start taking mandatory distributions from traditional retirement accounts at age 70 1/2.
Why Social Security benefit purchase power has plummeted
Social Security benefit purchasing power is decreasing as the cost of living adjustments are not keeping up with the rising prices of goods and services that retirees need, a report from the Senior Citizens League shows in this Yahoo Finance article. To cope with inflation, retirees should not rely solely on Social Security, minimize their expenses and find ways to boost their income.
Is filing and suspending Social Security retirement benefits a good idea?
A husband who plans to wait until the age of 70 to file for Social Security is not required to file for and suspend his benefits at 66 to qualify for a spousal benefit on his wife’s record, according to this article on Forbes. This client should simply delay their own benefit and apply for a spousal benefit after his wife reaches full retirement age and starts taking her own benefits, an expert says. He can then switch to his own retirement benefit when he turns 70, and his spouse can also apply for a spousal benefit on his record, especially if 50% of his full benefit exceeds her own retirement benefit.