Estate Planning Attorney with Hook Law Center Shows How Retirement Investing is Evolving to Meet Challenges
Virginia Beach, VA (Law Firm Newswire) February 19, 2014 – Projections show that within 20 years, typical retirees will rely mostly on 401(k)s and other private retirement accounts to meet financial needs.
“That may be alarming to some, but the industry is evolving to help meet that challenge,” says Virginia estate planning attorney Andrew Hook. “A number of trends are increasing the effectiveness of 401(k)s and workers’ utilization of them.”
Hook identified the following six trends in the retirement investing industry.
Increased use of Roth 401(k)s: Like Roth IRAs, Roth 401(k)s are funded with after-tax contributions. Workers pay income taxes on money as they earn it, but earnings on contributions are not taxed. This option is popular with young workers, who often have lower salaries and lower tax liabilities than older workers.
Greater availability of self-directed plans: About 40 percent of employers now use plans that allow workers to invest in the wide market of stocks, bonds and mutual funds (as opposed to the narrow selection available in traditional plans). This option is attractive to those with investment experience and larger amounts of money to manage.
Automatic enrollment: Increasingly, companies are adopting “opt-out” policies, enrolling employees in 401(k) plans by default. At these companies, an average of 84 percent of workers enroll (compared to about 50 percent at companies with “opt-in” policies).
High-deductible health plans and health savings accounts (HSAs): More employers are offering health insurance plans with limited coverage and high deductibles. Young, healthy workers are eager to sign up for these plans and to combine them with health savings accounts. This route offers a triple tax advantage: contributions are made with pre-tax dollars, earnings are not taxed and withdrawals for qualified expenditures are not taxed.
Increased use of target-date funds: Target-date funds allocate investments across asset classes according to workers’ projected retirement dates, and, by extension, presumed risk tolerances. Funds geared to those far from retirement are heavily invested in stocks, whereas funds for those nearing retirement favor less volatile bonds. Over the years, each fund gradually adjusts its risk profile as its target date nears.
Better information for comparison and planning: Increasingly, employers are requiring performance benchmarking from investment companies and making that information available to workers. They are also providing workers with tools to extrapolate post-retirement income streams from current contributions.
“Ask your employer for this information if it is not already provided to you,” advises Hook. “And speak with an estate planning attorney for retirement planning advice.”
Hook Law Center
295 Bendix Road, Suite 170
Virginia Beach, Virginia 23452-1294
5806 Harbour View Blvd.
Suffolk VA 23435
- To help prevent elder abuse, address caregiver stress as it emerges
Elders are among the most vulnerable populations, and they are at special risk for abuse at the hands of their caregivers. Caregiver stress is one of the biggest contributing factors to elder abuse, and stressed-out caregivers are the most likely to abuse. Depression and anxiety are common among caregivers, who often provide hours of care [...]
- How to make homes safer for seniors
Older adults who continue to live independently at home will need a safe space in which to live. Making the home safe is essential for preventing injuries. Each year, around 7,000 elderly people die in accidents at home, while millions more sustain serious injuries there. Falls are the most common cause of injury. Drowning in [...]
- Eye and smell tests may make early detection of Alzheimer’s possible
Results of four new research trials suggest that changes to the eyes and ability to smell may be valuable in the early detection of Alzheimer’s. Reports presented at the 2014 Alzheimer’s Association International Conference in Copenhagen revealed that eye exams could be used to identify build-up of beta amyloid in the brain, while a decreased [...]
- Seniors may qualify for Medicaid by spending down assets safely
Federal law dictates that only someone below a benchmark level of assets can qualify for Medicaid, beyond which it is determined that the individual does not have the assets to pay for his or her own care. Many seniors who apply do not receive Medicaid because their asset level is too high to qualify. In [...]
- Facts to know about Medicare and retirement
If your 65th birthday is approaching, you should make sure you are aware of your Medicare options and are prepared to enroll in Medicare if necessary. Here are a few things you should know. First, if you are receiving Social Security benefits already, then you will be enrolled in Medicare Part A (hospital insurance) and [...]