Displaying items by tag: retirement

California’s new retirement law, effective January 1, 2025, reduces protections on tax-qualified retirement plans, impacting debtors who may now face increased vulnerability to creditor claims. This law applies a means test to assets in 401(k)s and similar plans, allowing judges to assess how much of these funds can be claimed by creditors based on the debtor’s other assets and timeline to retirement. 

While federal ERISA protections still shield assets within qualified plans from creditors, these safeguards do not extend to distributions, meaning assets will be only partially protected once withdrawn. 

Some debtors may consider relocating to states offering full retirement asset exemptions, while others might roll their assets into self-directed IRAs, potentially securing greater protection through international investments. 

Finsum: The election will play a pivotal roll in the future of retirement regulation and advisors should monitor the developments. 

An unprecedented number of American households are uncertain about the economic future, with many expecting inflation to take a larger portion of their income. Financial stress from the high cost of living and rising borrowing costs has added to the uncertainty, especially in an election year. 

Though consumer sentiment slightly improved in September due to expectations of lower inflation and potential interest rate cuts, the overall view of current conditions remains near record lows. Prices are still significantly higher than before the pandemic, despite inflation slowing.

 A growing number of Americans expect no real income growth over the next five years. Additionally, confidence in achieving a comfortable retirement is at its lowest point since 2013.

Finsum: Inflation hasn’t been a strong concern for retirement in nearly 40 years, but suddenly it is having a critical impact, and investors should consider options accordingly.

Many financial advisors struggle with the idea of their own retirement due to a fear of losing identity and purpose, leading to delayed succession planning. Casey Jorgensen, head of the Dynasty Institute for Adaptive Leadership, emphasizes the psychological barriers that keep advisors working past their prime. 

Advisors often fear losing their sense of self and purpose, contributing to delayed transitions and frustrated potential successors. Dynasty Financial Partners focuses on the emotional aspects of retirement in its advisor succession planning efforts, encouraging advisors to plan not just for what they’re leaving behind, but for what lies ahead. 

Failure to prepare adequately for retirement can negatively impact a firm’s growth and valuation as aging clients distribute assets. Jorgensen encourages advisors to develop a post-career plan to maintain a sense of purpose after stepping down from their careers.

Finsum: A successful succession plan is not only fruitful for the company but for advisors as well and can give other clients confidence. 

The SEC has introduced new disclosure requirements and registration processes for registered index-linked annuities (RILAs) and registered market value adjustment (MVA) annuities in hopes of bringing clarity to the industry. The final rule mandates issuers of non-variable annuities to use Form N-4, updating the framework for these products. 

This change aims to help investors make informed decisions, as the market for these products has grown significantly, with RILA sales reaching $47.4 billion in 2023. The amendments include a summary prospectus framework and extend Rule 156 to non-variable annuity advertisements to prevent misleading materials. 

While SEC Commissioner Hester Peirce supports the general approach, she expressed concerns about potential biases and the need for creative disclosure techniques to enhance investor understanding. The amendments will take effect 60 days after publication in the Federal Register, with full compliance required by May 1, 2026.

Finsum: Annuities seem bogged down by more complexity, and this ruling could help the industry in the long run. 

Alternative investing, which includes assets like private equity, real estate, and hedge funds, is becoming more accessible beyond just the ultra-wealthy and institutions. These investments can enhance portfolio diversification and potentially mitigate risk due to their low correlation with public markets. 

Utilizing self-directed IRAs for alternative investments offers the added benefit of tax-free growth. The popularity of alternative assets is rising, with private market assets growing significantly and individual investors currently holding a small percentage of these assets. 

Diversifying with alternatives can help manage market risk, especially during volatile times. New investment platforms are making it easier to access alternative investments, allowing for a more customized and balanced portfolio approach.