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Why clients should wait to pay off their mortgage in retirement

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

Should clients pay off their mortgage before they retire?
Seniors don't need to eliminate their home mortgage before they retire to secure their retirement, according to this Yahoo Finance article. That's because investing the money could mean better returns than what they could save from paying off their mortgage debt. Clients will also be better off keeping their home mortgage in retirement if they have other loans with higher interest rates or they will have to use their savings to pay the debt. Seniors can also claim a tax deduction for mortgage payments, allowing them to reduce their tax burden in retirement.

A costly Social Security mistake could result in years of regret
Although seniors can file for Social Security retirement benefits as early as 62, such an option could be a mistake, as it would result in a permanent reduction to their benefit payouts, according to this article in CNBC. They are advised to wait until they reach their full retirement age to avoid any reduction. “It pays to wait,” says an expert with the AARP Public Policy Institute. “You wouldn’t be able to beat that on the open market, certainly without taking some risk.”

Have 401(k)s reached their expiration date?
The existing retirement system is not enough to help all working clients secure their retirement, writes Morningstar's John Rekenthaler. "The 401(k) structure is deeply unpopular with most investment writers, who regard it as a patchwork scheme that permits companies to foist their retirement-income risks onto employees," he writes. "401(k) plans were not invented to serve the general public, being instead supplemental tax-avoidance schemes for the privileged.

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For couples dealing with money, together is better
Couples are advised to work together when making decisions on big-picture finances, such as maximizing their retirement plans, coordinating health insurance and reducing their tax burden, writes an expert in Kiplinger. For example, they need to determine their savings rate in their 401(k)s and take advantage of the employer's match to secure retirement for both spouses. They should also consider setting up a Roth IRA to create a source of after-tax income in retirement or roll over some of after-tax contributions in their traditional IRA to a Roth for continued tax-deferred growth.

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