Our daily roundup of retirement news your clients may be thinking about.
Seniors are advised to develop an effective withdrawal strategy to avoid outliving their retirement savings, writes Christine Benz of Morningstar. One approach to determine a retirement withdrawal rate is to set a fixed percentage of their portfolio every year. Seniors can also compute a withdrawal rate based on a specific dollar amount per year or opt for a hybrid strategy that will enable them to modify the percentage based on market performance, writes the expert. "Setting a withdrawal rate is one of the biggest decisions you'll make in retirement, so this is an area to get some help."
Retirees who want to minimize the tax burden on their income should hold on to their investments for more than a year before selling them to owe zero taxes on capital gains, writes a CFP for Kiplinger. They also have the option of donating the mandatory distributions from their tax-deferred accounts directly to charity through a qualified charitable distributions to avoid taxation on the withdrawals. Converting traditional IRA assets into a Roth account, getting the net unrealized appreciation and using strategic investment withdrawals can also help retirees reduce the tax bite on their earnings.
Clients should consider modifying their concept of "financial Independence/retire early" from simply having enough savings or reducing their expenses to become financially independent, according to this opinion article from MarketWatch. "In my opinion, financial independence should equal having sufficient passive income and investments to replace your wages or the median income (like the cost of living) for the community you are living in," explains the expert. "Financial independence should entail some form of contingency planning and/or redundancy."
Americans who consider relocating abroad in retirement are advised to have a comprehensive plan in place before making the move, writes an expert on U.S. News & World Report. That's because they will still face tax obligations in the U.S. even if they retire abroad, and they are likely to be subject to more tax rules in their new country of residence, explains the expert. "Certain options for reducing your local tax bill can come off the table once you've taken a local address. You should seek American and local legal advice."
