How clients can avoid 401(k) withdrawal penalties
401(k) participants who make distributions before they reach the age of 59 1/2 face a 10% penalty aside from taxes on the withdrawn amount, according to this article on Forbes. While workers are better off leaving the funds in the plan, they are allowed to make penalty-free withdrawals if they use the money to pay for out-of-pocket medical bills not covered by insurance, or they take what the IRS calls "72(t) distributions." Early 401(k) withdrawals are also not subject to penalty if clients are disabled or are getting a divorce.
Funding 40 years of retirement
Studies show that the number of centenarians is increasing, suggesting that more people are likely to have a longer retirement, according to this article on Kiplinger. Clients who expect to live to age 100 can avoid outliving their nest egg by staying invested in equities and creating a pension-like income stream like an annuity. They should also consider working longer so they will be able to delay their Social Security retirement benefits and increase the benefit value.
Corporate pension funding levels dip in 2016
An analysis by Willis Towers Watson has found that funding levels for pensions for 410 companies dropped to 80% at the end of 2016 from 81% recorded at the end of 2015, according to this article on The Wall Street Journal. An expert with the consulting firm said that the findings exceeded expectations that analysts had before Donald Trump's victory at the presidential election, which drove a rally in the stock markets and spurred interest rate increases. Funding levels for corporate pensions dropped to about 75% in June, the expert says, adding that “we’re where we’ve been stuck at since the financial crisis.”
Do I have enough savings for a secure retirement?
Clients have to take a number of steps to know whether they have enough savings to secure their retirement, according to this article on CNNMoney. First, they should create a retirement budget to determine the amount they need to cover their annual expenses. Then, they may use a retirement income calculator to compute how long their current savings and other income streams will last to support their lifestyle based on the budget. To increase the odds of prolonging the life of their nest egg, retirees should minimize their spending and adopt an aggressive investing approach by increasing their exposure to stocks for better returns.
A new investor study: Ask yourself these questions
A study by FINRA Foundation has found that only a third of the adult Americans own non-retirement investment accounts, according to this article on personal finance website Motley Fool. These investors are likely to be older, male, white, and college-educated adults who earn more than the average American. Of these respondents, about a third claimed to hold below $50,000 in non-retirement investments, while slightly less than a third said that the value of their investments in non-retirement accounts exceeds $250,000.