Why aren’t more clients making 401(k) contributions?
Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about.
Why clients aren’t saving more in their 401(k)s
As much as 30% of workers raised their 401(k) pretax contributions this year, with nearly 50% of the respondents saying they continue making contributions this year at last year’s rates, according to survey in this article from CNBC. About 25% of the participants in the Bankrate report who opted not to increase their contribution rates claimed they were “comfortable” with their current savings rates, while nearly a quarter cited stagnant or dwindling incomes as the reason for their decision.
How to cut clients’ largest expense in retirement
Seniors are advised to find ways to reduce their housing costs, as this expense is considered the largest in retirement, according to a Motley Fool article. These clients are advised to pay off their mortgages prior to retirement and downside to lower the costs of home insurance, property taxes and maintenance. Relocating to a less expensive location is another option, especially in a place with lower rent and low or no property taxes.
Is it bad to contribute too much to a 401(k)?
Socking away most of retirement savings in a 401(k) could be a wrong financial move, as distributions from the account will be subject to the highest income tax rate, according to an article from Kiplinger. Withdrawals from 401(k)s could boost clients’ taxable income, which could result in taxation of a portion of their Social Security benefits. A 401(k) account is subject to required minimum distribution rules and tax law changes in the future, making it the worse account to leave assets to a surviving spouse after death.
Clients can increase Social Security benefits if they work past 70
Some clients who continue working past the age of 70 can expect an increase in their Social Security benefit, according to an article from Forbes. "Social Security retirement benefits are based on an average of a person's highest 35 years of wage-indexed earnings on which they paid Social Security taxes, regardless of the person's age at the time they had the earnings," an economics professor at Boston University writes.