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Letters to the Editor

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To the Editors:

Robert Warren’s letter to the editor (August 2006 AAII Journal) regarding closing a direct purchase plan of a decedent does not address the problems of closing a plan of a living participant [AAII’s 2006 “Guide to Direct Purchase Plans” appeared in the June 2006 AAII Journal]. In many plans (possibly all), there is a direct deduction plan tied to a participant’s bank account. I found that getting out of the plan would require careful timing. The transfer agent, in my case, was in New York City and the administering agent was in Chicago (different companies). I closed the account with the transfer agent (per instructions) and was told this cancelled the account. Unfortunately, one additional purchase was made after I closed with the transfer agent. Getting the administering agent and the transferring agent to agree that I had an additional purchase after the account was closed was very difficult. I would never go into another direct purchase plan. There are just too many hidden problems

Bob Mount
Via E-mail

To the Editors,

I enjoy AAII publications and have learned a great deal from them. Nonetheless, I find the same archetypal view of investment in AAII as on Wall Street: capital gains. It seems to me that many members would be better off with a focus on income and cash flow. In my investments, I try to maximize income while minimizing taxes and fees. Dividend growth stocks, master limited partnerships and municipal bonds accomplish these goals for me. I appreciate the strong focus on Roth IRAs, but more stress on income, especially for retirement, would be a welcom

Ron Francisco
Via E-mail

To the Editors:

In the September 2006 issue of the AAII Journal, Mark Hulbert wisely points out that the vast majority of investment newsletters underperform portfolios made up of their original recommendations [“Creating the Ideal Benchmark: Freeze Your Adviser”]. I would like to point out that this is a natural phenomenon, common with other kinds of investments. Jeremy Siegel and Jeremy Schwartz pointed out that someone who had bought the original S&P 500 stocks in March of 1957 and just kept them till the end of 2003 would have outperformed the investor who updated his holdings every time the S&P 500 changed [“Long-Term Returns on the Original S&P 500 Companies,” January/February 2006 Financial Analysts Journal]. The outperformance was 0.55% compounded yearly. That is a lot of money over a nearly 50-year span. The first guess is always your best guess, any subsequent change just makes things worse.

Thomas J. Kertesz
Via E-mail

To the Editors:

Christine Fahlund’s portfolio strategies article on Roth conversions was very well done [“Should You Consider a Roth IRA Conversion in 2010?” August 2006 AAII Journal]. In calculating the cost of the Roth conversion for Medicare beneficiaries, it is necessary to add the increase in Medicare premium to the cost of conversion. The premium for each year is based on the income from the previous year—including Roth conversion. The premium increases, of course, as the Medicare beneficiary’s income increases. The premium cost in future years would be determined by income, including Roth distributions.

Paul Danaby
Via E-mail

Tax Guide Correction

On page 4 of the Personal Tax & Financial Planning Guide 2006, in the section titled “Individual Retirement Accounts and 401(k) Plans,” the IRA contribution limits for 2008 are incorrect. The correct IRA annual contribution limits for 2008 are $5,000 for anyone under the age of 50 and $6,000 for those who are 50 or older, an increase of $1,000 from the 2007 IRA annual contribution limits. AAII regrets any inconvenience this error has caused.

 

 

 


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