Rich Retirement Resource

Comments on “Solving the Problem of Retirement,” by Paul Merriman, in the July 2017 AAII Journal:

As my wife is considerably younger than me, I have been struggling with this [potential] problem for several years in my planning.

The best solution seems to be, 1) keep current expenses to a minimum so you will be able to start at that rate of withdrawal, 2) save far more than you think you need and 3) stay healthy to prevent those costs from taking away your portfolio and the income it can produce.

Thank you for these articles that help people plan the best they can.
—David Michaels from North Carolina

I have been following Paul Merriman for over five years. His website is a wealth of information and history. It will take someone a few days or weeks to assimilate it. Then, of course, there will be some who have to check into all of his analysis. That will take longer.

When I first became aware of Paul, I thought he did an astounding job of putting all of this together. I still do. He has year-by-year returns and withdrawals for multiple distribution schedules. I spent more than six months analyzing his information and never really finished.

I don’t think Paul’s approach(es) gave him justice here due to lack of space in this article. I’m sure he could have gone on and on and on. I suggest going to his website [paulmerriman.com] to find more information. This is a great start.
—Robert McGreevy from California

Measuring the Market’s Valuation

Comment on “Three Value-Investing Benchmarks,” by Gary Smith, in the July 2017 AAII Journal:

Though the stats are reassuring, any investor needs to be certain they can tolerate and afford any negative fluctuations in equity prices, however violent or temporary they may be. Otherwise, they will almost certainly incur substantial losses selling equities after prices have fallen too much to be acceptable.
—John Read from Montana

Clarification on IRA Beneficiaries

Comment on “Inherited IRA Rules for Spouses, Heirs and Trusts,” by Charles Rotblut, CFA, in the July 2017 AAII Journal:

If there are two beneficiaries of a trust, are the RMDs (required minimum distributions) based on the age of each beneficiary, the age of the oldest beneficiary or the age of the deceased owner?
—Richard Golub from California

Charles Rotblut responds:
J.K. Lasser’s “Your Income Tax 2017” (John Wiley & Sons, 2017) says, “All of the trust beneficiaries must receive RMDs over the life expectancy of the oldest beneficiary.”

Considering RMDs in Retirement Case Study

Comments on “Allocating to Manage Risk: A Case Study,” by Charles Rotblut, CFA, in the July 2017 AAII Journal:

To fully bring this data up to date, a couple 10 years into retirement in all likelihood would be adhering to the RMD withdrawal rules (not the 4% rule) and must withdraw at least that minimum amount from their IRA. Since their ages are not mentioned, it isn’t possible to calculate the required withdrawal rate this fictional couple would be subject to.

The point is that adhering to the 4% withdrawal rate is no longer an option if your RMD rate is higher than 4%, and that point should be made in these articles.
—Norm Le Bel from Massachusetts

What commenter Norm Le Bel ignores is that the requirement to withdraw funds from an IRA is not a requirement to spend the withdrawn funds. If an investor wishes to adhere to the 4% rule in the presence of an RMD in excess of this amount, then all they must do is reinvest the money in a non-IRA account (e.g., a taxable brokerage or mutual fund account).

Note, however, that such a strategy may complicate the asset allocation decisions by requiring that the allocation within the IRA allows for enough cash and bonds to fund RMDs for the next few years. This, in turn, may also affect the allocation within the taxable accounts.
—K. Zetterholm from West Virginia