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
- Understanding a Resident’s Transfer and Discharge Rights under the Nursing Home Reform Act
by Shannon A. Laymon-Pecoraro, Esq. One of the most frequent issues I face revolves around the discharge of a resident from a nursing home. Often times, an agent or advocate visits my office with a concern, because their loved one is being discharged from the nursing home, and they want to assess what their options […]
- What personal representatives of estates need to know
Personal representatives, or executors, of estates need to be aware of the procedure that is used to probate an estate with a will. The executor who is designated in the will must make an appointment with the probate division to probate the will and become qualified to serve as executor. To do this in Virginia, […]
- Help may be needed in deciding on senior housing
Elderly people who value their independence and are accustomed to living alone are increasingly becoming incapable of doing so. The need for medical attention may prompt some older individuals to consider their options, including moving to a nursing home or another kind of assisted living facility. Another possibility is to have in-home care along with […]
- Net gifts can be used to reduce gift tax rate
One strategy to lower your taxable estate is lifetime giving. However, there is a gift tax rate of 40 percent. If you have exhausted your $5.43 million gift and estate tax exemption, and you wish to lower your gift taxes, consider the possibility of making net gifts. This method obligates the recipient to pay the […]
- Andrew Hook talks to Stretcher about revocable living trusts
In an interview for Stretcher.com, Attorney Andrew Hook explains the meaning of a revocable living trust by dividing the term into its main parts: “revocable,” “living” and “trust.” He describes a revocable living trust as a legal agreement in which a person, who is referred to as the “settlor” or “grantor,” transfers property to a […]