• Letters to the Editor
  • Letters

    Model Shadow Stock Portfolio Rules

    Comments posted to “Three Different Ways to Follow the Model Shadow Stock Portfolio,” by James B. Cloonan, in the July 2013 AAII Journal:

    There should be more details on entry points for new members who are starting to build their portfolio. Since the changes are made quarterly, any entry and exit prices would be useful.

    —Priya Balakrishnan from Texas

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    Discussion

    Harry Ohlson from CA posted over 3 years ago:

    Safe Withdrawal Rates etc.
    Another consideration that I have not seen addressed is the effect of Minimum Required Distributions in portfolios that have substantial tax-deferred assets. As the retiree
    grows older, withdrawals soon exceed the 4%
    level and total taxable income increases significantly in succeeding years. The higher tax bracket results in a lower total portfolio value. The assumptions and projections no longer hold true.


    E M Easterly from OR posted over 3 years ago:

    Yes, Mr. Ohison, RMD's steadily increase as we age and hence our taxable annual income increases. But taxes on current income have no impact upon the current value of the portion of our portfolio subject to the required distribution formula. Indeed, as long as the annual RMD is less than the return on the portfolio the portfolio will grow.

    As Mr. Marrett suggested in his comment it behooves all of us to routinely review our retirement assets and spend accordingly. To the extent you are suggesting a set annual percentage withdrawal amount from invested assets cannot be set in stone I agree. Most certainly withdrawal rates need to be modified to reflect individual portfolio and spending habits. And while RMD withdrawal rates can impact annual tax liabilities those tax rates have absolutely no impact of value of the portfolio subject to RMD's.


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