The new Department of Labor Fiduciary Rule is scheduled to be phased in soon.
This ruling expands the “investment advice fiduciary” standard definition while still demanding that advisors always act in the best interests of their clients.
Related: DOL expected to delay fiduciary rule
As part of that commitment, it’s important for investment advisory industry professionals to recognize that the needs of each particular client will differ based on a variety of factors including income, budget, family situation and personal goals. There is no “one-size-fits-all” retirement plan; each individual client deserves a customized solution that addresses their unique situation.
But there are a variety of general tips and strategies that all clients should be aware of that can help with retirement planning at ages 40, 50, 60 and 70.
At age 40: Clients should be maximizing tax-deferred and tax-free retirement plans to provide assets plenty of time to grow, while also developing a plan to eliminate high-interest debt balances. However, at this stage in life, families with children must also anticipate an increase in spending based on education needs and family living expenses. It is therefore important to maintain a balance between planning for your retirement, while also maintaining an appropriate amount of readily available excess cash for emergency situations.
At age 50: Clients should continue to take advantage of tax-deferred and tax-free retirement plans, but may also want to consider adding after-tax savings to their retirement plans. Adding after-tax savings to an investment plan can include the funding of annuities, as well as brokerage accounts. A retirement plan should be in place and regularly updated as that will drive the target for after-tax savings. The goal is to build a cash flow stream to fill the time between retirement and required minimum distributions and Social Security. A properly structured annuity, with downside protection, can help minimize the impact volatile markets may have on a client’s retirement goals.
At age 60: This is the perfect time to encourage clients to pay off all of their debt, including their mortgage balance, in an effort to begin retirement debt-free. This will allow clients the peace-of-mind to allow more discretionary cash flow during retirement. Some clients may be used to the tax-deduction for mortgage interest. However, it is important to also consider the itemization of deductions in retirement or the use of standard deduction, along with a potentially lower effective tax-rate in retirement.