Distributing IRA Funds After Retirement
Comments posted to “Using the Bucket Approach With Your Retirement Portfolio,” by Christine Benz, in the October 2013 AAII Journal:
This is a valuable article for my wife and myself as we enter retirement. We have retirement money in both tax-sheltered and taxable accounts and in the tax-sheltered accounts, there are both tax-deferred (RMDs required) and Roth (tax-free) IRA funds. While I assume the taxable accounts would be used to fund Bucket 1, is there a rule of thumb on where the Roth IRA money should be placed? I assume it’s Bucket 3, where this tax-free money has a long time to grow without being subject to RMD withdrawals, but I’m not sure. Thanks for any insights you m
— CNS from Massachusetts
Christine Benz responds:
The reader is right that Roth assets, because they have the most tax benefits, should generally be last in the distribution queue. Meanwhile, taxable assets should generally go first, because their year-to-year tax costs are the highest. But the name of the game is to stay flexible and try to maintain tax diversification—exposure to taxable, traditional IRA, and Roth accounts—throughout retirement. If you’ve hit a year when you expect to be in a higher tax bracket than is normal for you due to forces beyond your control—for example, you’re taking RMDs and your IRA is way up in value—it may be worthwhile to draw any additional income you need from your Roth account to help keep your total tax bill down.
Social Security Benefits With Pension Plans
Comment posted to “Social Security Basics,” by William Reichenstein and William Meyer, in the October 2013 AAII Journal:
If you’re eligible for Social Security benefits based on having worked full-time for a significant number of years, will pension payments from a pension plan for part-time work reduce your Social Security benefits?
— Jeff Ryan from Illinois
Charles Rotblut responds:
The Social Security Administration says on its website, “If your pension is from work where you paid Social Security taxes, it will not affect the amount of your Social Security benefit. However, if any part of your pension is from work where you did not pay Social Security taxes, it could affect the amount of your Social Security benefit.” See www.socialsecurity.gov for more information.
Experience With Shadow Stock Portfolio
Comment posted to “The Model Shadow Stock Portfolio and Micro-Cap Stock Spreads,” by James B. Cloonan, in the October 2013 AAII Journal:
I have been with AAII for more than four years and couldn’t be happier. I buy stocks on perhaps the worst of all possible systems: intuition. I am by nature a scientist, so I know the fallacy of allowing emotional attachment to inform decisions.
This is why AAII has been so valuable to me. I typically own four or five of the shadow stocks. With the minor exception of BAM, held too briefly, all of the shadow stocks have shown above-average profitability. That only 35% of my portfolio is in AAII stocks reflects my fear of straying too far from so-called “conventional wisdom.”
I cannot help but wonder if other readers/staff have the same fear and maintain a substantial position in large-cap blue-chip stocks (like Wells Fargo, Wal-Mart, AT&T, etc.)?
Keep up the good work and thanks for your unselfish attention to the (little guy) individual investor.
—Tom Adams from Virginia
Screening in Stock Investor Pro
Comment posted to “‘What Works’: Key New Findings on Stock Selection,” by James O’Shaughnessy, in the October 2013 AAII Journal:
The article is great. I want to try it, but where do I get the screen? Without the screen it isn’t usable for me.
—Maurice Peel from Arkansas
Charles Rotblut responds:
I’m looking into what we can do in terms of providing instructions on how to replicate Jim’s criteria in Stock Investor Pro.
Keep in mind that a big message of this article is not to rely on one single criterion. Rather, consider valuation, financial strength and the quality of earnings.