Your client lost their job due to coronavirus. Now what?
Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about
Your client lost their corporate job due to the coronavirus. Now what?
Working clients who may have received severance pay after losing their jobs amid the coronavirus crisis have the option of investing the money for retirement and other long-term goals if they are in a good financial standing, according to this article in Kiplinger. Those who are approaching retirement will be better off putting the payment in a fixed income portfolio or a bank account. High-income workers who lost their jobs are advised to max out their pretax 401(k) contributions, as the severance pay could push them into a higher tax bracket, according to the article.
A recession can change the FIRE movement for the better
The lifestyle movement known as FIRE, or Financial Independence Retire Early, will continue despite the economic downturn, however clients who embrace the concept will be forced to make major changes to their strategy, writes an expert in MarketWatch. "Just as this recession is in-part a long-overdue correction for an overvalued stock market, it’s also a moment of correction for the overheated FIRE movement," the expert writes. "But if we can hit reset, focus on the fundamentals, and ditch the corner-cutting ideas, the FIRE movement will continue to grow long into the future.
What is a 401(k) rollover?
Workers who are changing jobs have the option of rolling over their old 401(k) assets into their new plan, according to this article in Yahoo Finance. Clients who receive the check from their former plan sponsor should ensure they deposit the money in the new plan within 60 days to avoid taxes and early withdrawal penalty, according to the article. Workers who consider transferring their traditional 401(k) assets into a Roth account are advised to also ensure that they have the funds to cover the tax bill, while those who roll their old Roth 401(k) assets over to a Roth IRA won't face any tax liability.
What clients should know know about cash value life insurance
A permanent life insurance policy offers a cash value feature that policyholders can use as an investment-like savings account, says a Forbes contributor. "A cash value feature typically earns interest or other investment gains and grows tax-deferred," she explains. "You can withdraw money from cash value or take a loan against it and use the money for anything you want: for an emergency, to supplement retirement income, to pay premiums, or anything you like."