Clients Over 40? Smart Money Moves

3 Smart money moves for clients in their 40s

People in their 40s are likely to have achieved a certain level of financial freedom and have a better sense of their needs and expenses in retirement. This puts them in a better position to assess their retirement plans and act accordingly to secure their golden years. One smart strategy to consider is maxing out contributions to their retirement account, such as traditional or Roth IRA. Another is to save for their children’s education through a 529 saving plan. Finally, they should start thinking about what will happen to their assets when they die. Having a will in place is a good first step.

Economic anxiety extends to retirement

Government lawmakers should consider creating a retirement system that combines the flexibility of a 401(k) plan and the best features of a traditional pension to address the growing anxiety of American workers about retirement. This should mean making retirement saving easy for workers, boost transparency requirements for retirement plans, include lifetime income options for these plans, and provide financial planning tools for retirement savers, says the expert.

1 big expense retirees are more than willing to pay

Many Medicare beneficiaries are getting a Medicare Supplemental Insurance policy to cover out-of-pocket medical expenses, according to this article on personal finance website Motley Fool. Most of them are buying the most expensive plan despite the costs, as this would give them peace of mind that their future health care expenses will be taken care of. The American Association for Medicare Supplement Insurance says that two-thirds of seniors who get a Medigap plan opt for Plan F, the most comprehensive but most expensive plan, with monthly premiums ranging from $159 to $239, depending on the policyholders’ location.

This Roth IRA move can create a massive tax headache

Converting a portion or full balance of their traditional IRA assets into a Roth account could result in a heavy tax liability for clients, according to this article from Money. That is because the converted amount is treated as taxable income, unless the money involved is their nondeductible contributions. “I always tell clients to do a tax projection before they convert, so that they can see what the tax bill will be,” says a financial planner.

How high earners can set up a Roth IRA

Clients whose income exceeds the income threshold have the option to make nondeductible contributions to a traditional IRA, but not Roth IRA, according to this article on Kiplinger. Once the money is in traditional IRA, they also have the option to convert the funds to a Roth IRA. The Roth conversion of nondeductible contributions won’t trigger tax liability, except for the earnings portion of the converted amount. Clients will owe taxes on the entire converted amount if it involves tax-deductible contributions.

About Jeffrey Berson

40 years in and around the industry has made Insurance a part of my DNA. I have had the pleasure of working with and for some of the greatest minds in our industry. My "Bersonal" View is an attempt to capture some of the best ideas, the best concepts and the best practices in a way that can lead to success for others. It will certainly be my point of view, so please...don't take it "Bersonal".
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