Comments Posted to “Social Security: Delay or Take the Money and Run—Act II,” by Robert Muksian, Ph.D., May 2011 AAII Journal
If one spouse has a low primary insurance amount (or has not worked enough to claim Social Security benefits on their own earnings) and is the spouse with the longer life expectancy, it is likely advantageous for that spouse to claim spousal benefits at age 66, since spousal benefits do not accrue delayed retirement credits beyond full retirement age. Meanwhile, the spouse with the high primary insurance amount can delay retirement and accrue delayed retirement benefits in order to maximize the surviving spouse’s eventual benefits. The exact analysis needs to take into account both spouses’ income records, ages, life expectancies, and health.
Milton from New Jersey
This is an excellent article, thoroughly well-thought-out, that provides not simply the mechanics of how the Social Security Administration arrives at the benefit, but the factors that an individual should consider in determining whether to “strike early” and receive benefits, or withhold. What I particularly like is that the author did the math in determining an earlier distribution with regards to “opportunity costs” (i.e., receiving a return on current money received from Social Security).
Cliff from New Hampshire
Comments Posted to the Retired Investor column “Limiting Required Minimum Distribution Costs,” by Charles Rotblut, CFA, May 2011 AAII Journal
In some cases you can avoid transaction costs by transferring an investment or part of an investment from your IRA to an investment account. This is simple if both accounts are managed by the same company—i.e., your broker. However transfers between companies are also possible in many cases.
Richard from California
The one thing that I had felt was lacking from AAII was advice for those of us who had already reached retirement age. This new column will certainly be beneficial to me and my wife as we continue our independent investing in this period. Thank you.
Tom from Georgia
Charles Rotblut responds:
Thank you for the positive feedback. Though the Retired Investor column won’t appear in every issue, my plan is to keep it as a recurring feature in the AAII Journal.
Comment Posted to “Best Practices for Portfolio Rebalancing,” by Colleen Jaconetti et al, May 2011 AAII Journal
It’s worth reading the original Vanguard study referenced in the article. Besides the 1926–2009 results, its appendices show the more recent 1989–2009 results for all the rebalancing strategies. When you compare the full 1926–2009 results with the more recent results one thing jumps right out: Over the longer time interval, rebalancing leads to about 0.5% less annual return than “buy and hold”; but over the more recent 20 years, rebalancing gives you about 0.5% MORE annual return.
The authors believe that the principal goal of rebalancing is to minimize tracking error. However, their data clearly shows that an additional benefit is reduced volatility.
Nola from California
In “The Advantages of Diversification and Rebalancing” (Portfolio Strategies column in the April 2011 AAII Journal), the standard deviation for the Static Portfolio is 15.4%, not 27.1% as originally published. The original calculation picked up a –100% return figure from a hidden cell, which resulted in the error. Even after the correction, the Static Portfolio remains the most volatile of the three portfolios and shows the downside of not rebalancing on a regular basis.