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A retirement plan for clients who may live to 150

Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about.

A retirement plan for Americans who may live to age 150
Millennial and Gen Z clients will live longer — and will need to save more as a result, according to this article in Fox Business. It takes only three simple steps for Americans to boost their retirement prospects: contribute to a tax-advantaged retirement plan, own a permanent life insurance policy and create a source of guaranteed lifetime income by buying an annuity, according to the article. “By doing any one of these things, they’d be better off. By doing all three, they are guaranteed to live comfortably in retirement,” the article states.

Retirement couple by bloomberg news

7 tips to maximize retirement savings
Clients are advised to automate their 401(k) and IRA contributions to maximize their retirement savings, according to this Forbes article. They should also take advantage of their employer match, consider making catch-up contributions and fund a Roth IRA, which can boost their tax-free income in retirement. The article also advises clients to develop a sustainable withdrawal strategy and include a taxable investment account to achieve income flexibility. A taxable investment account allows retirement savers to boost tax efficiency in their portfolio. For example, they can hold their tax-free municipal bonds in a taxable account instead of a tax-advantaged savings vehicle.

Is an IRA enough to save for retirement?
For clients who have no access to employer-sponsored retirement plans, contributing to an IRA alone may be enough to build sufficient retirement savings, according to this Motley Fool article. A traditional IRA is funded with pretax dollars, and clients can contribute up to $6,000-per-year ($7,000 for clients aged 50 and older). Those who want to save more for retirement can save the money in a taxable brokerage account or a HSA, which offers triple tax benefits.

From public service to operating a craft brewery, planners are keeping busy outside the office.
January 2

Clients can’t escape income tax by using 401(k) funds to pay off mortgages
Experts say that dipping into traditional 401(k)s to pay off a mortgage may not be a smart move, according to this article from The Washington Post. A CPA explained it this way: “Taking funds from retirement assets to pay down or eliminate a mortgage may make sense from a cash flow perspective for taxpayers on a monthly basis, especially during the early years of a mortgage when higher interest amounts would otherwise need to be paid. But people often overlook the income tax impact of taking a distribution since 401(k) assets are taxed at ordinary rates. You can’t avoid (or delay) the tax impact once the distribution is taken and the funds are used.”

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