income, retirement, Taxes

RMD: What are the Risks and How Can We Address Them?

Several recent studies show peoples number one fear is running out of money during retirement.

To prepare us for retirement the government gives workers the ability to set up qualified accounts in order to save for retirement and get tax deferred growth. By deferring taxes money saved can grow faster. You put money away, not paying taxes now, but paying taxes on the money when you pull it out during retirement.

When you get to retirement, you can start pulling money from your account. In the past it has been considered good practice to not draw more than 4% from an account during retirement in order to make sure you don’t outlive your money. In the past bond yields have been 5-7% and that makes a 4% draw down possible. Now over the past 5 years bond yields have been around 2-3% and because many retirees rely on bonds to deliver income to their portfolio, many economists and advisors have been advising clients to withdraw less from their IRAs; this is so retirees don’t run out of money when they are older.

Now what if I told you there was a government program that requires you to draw more income from your account, without any consideration for how long you or your spouse will live, and without regard for whether you will run out of money or not.

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income, retirement, Taxes

First Steps to Retirement Planning

Many people are paralyzed into inaction when they start thinking about the challenge of planning for retirement. The truth is there are a few first steps anyone can take on their own to improve their chances for success.

A first step is to determine how much income you can expect to receive from social security. In years past SSA would mail annual statements for people to see their expected benefits. Things have changed… go to google and search for “my social security”. You will create an account and through this account be able to determine your numbers.

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economy, income, interest rates, retirement, risk management, Taxes

Trick or Treat? Revisiting The Potential Downside of Tax Reform for Investors

There is an old story that goes “beware what you wish for…” Things don’t always turn out as expected. Two years ago the President proposed and Congress approved a huge tax cut plan… the Tax Cuts and Jobs Act (TCJA). The results have been controversial.

Along those lines I watched a fascinating interview of Tom Lee, head of research at Fundstrat, on Bloomberg two years ago. His insight proved very valuable and accurate. (1)

His feeling is that a Tax cut, as it was being discussed, could be negative for investors long term. “There’s two reasons; First, when cutting tax rate you raise the after tax cost of debt. Leverage becomes a problem for a lot of businesses. Second, because you are cutting tax rates you are effectively giving cash to all businesses, even businesses where you want to reduce allocation.“

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