Your Wealth Reserve: Your RMD will tell you how much you need in retirement

Your RMD will tell you how much you need in retirement

When you save for retirement in a 401k, 403b, IRA, or other deferred taxation account, you will need to pay the tax when you retire using IRS rules. The required minimum distribution (RMD) will be about 4% of your total of all your deferred account balances every year beginning at age 72. The formula recalculates each year based on your previous year’s balances and your rising age. Your mutual fund company or broker will do the calculation so you don’t get a penalty for a mistake. However, to answer the question how much do you need to save, you can use this handy AARP calculator. https://www.aarp.org/work/retirement-planning/required-minimum-distribution-calculator.html. Here is an example: If you’re 72, for example, the distribution period is 25.6 years, based on the US life expectancy. Then divide your balance by the distribution period. Let’s say you have a combined $100,000 in your tax-deferred retirement accounts. $100,000 divided by 25.6 is $3,906.25, which is the amount you must withdraw annually. If you are in the 25 percent combined state and local tax bracket, you’ll owe $976.56 in taxes on your RMD. The tables change as well as the US life expectancy, so don’t use this calculator to determine your RMD for yourself. You can take your RMD out of one account, or take bits from each one, so long as you withdraw the required minimum. You can take more.

https://www.amazon.com/What-your-RMD-much-spend/dp/1718946716

It can’t get much worse

The S&P 500 growth-leaning stocks are down 22% YTD. If you are concerned you should buy this index in a low-cost fund since over most history, this index has regained its strength within a year. The exception was 1973 when the whole banking system collapsed. We don’t have that imbalance this time. The stock market has fallen back to the level it was in March on 2021. More likely the high employment and thus consumer demand will help provide impressive future returns. The alternative is taking your losses and moving money to 3% CDs for 15 months. No one knows for sure so when your brilliant advisor suggests an alternative be sure to query their analysis. Keep in mind that low-cost index returns have been tested over time: “In every single time period and data point tested, low-cost funds beat high-cost funds.” That goes for every sector of the economy too.

It’s your money: https://www.amazon.com/Best-Predictor-Investment-Success-Cost/dp/1502524082

Ideas that wreck our investment success

“I hold on to losing stock because I must wait to recover my losses.” This means we are too emotionally attached to a fantasy. “My stock pick rose 10 days in a row. I’m a genius picker.” This means you had beginner’s luck and look out! “My pick’s success prove that my next one will also be a success.” This means your luck is derived from a growing market where all boats rise with the tide. “My picks were also chosen by the Journal. I must know something about picking winners.” This coincidence means another of the millions that follow stocks saw what you saw. “My last 3 picks have been losers so my next pick will win.” This means you are a gambler not an investor. “I got a bonus at work I did not expect so I am blowing it on this stock.” You are a gambler. Take Buffett’s advice and become an investor in great companies for the long haul.

https://www.amazon.com/Warren-Buffett-Your-Investment-Advisor/dp/1518690963/

Ideas that ensure investment success

Investment success is defined as reaching your goals long-term. Investing is not gambling where you are looking for a short-term windfall. Investing in the companies that make things or add value to the world require commitment to putting money into expansion with the hope of gains later on. US companies as measured by the stock market price and dividends have shown compounding wealth at about 11% per year on average over time. History of annual gains are recorded here. From 1871 to 2021 the growth rate is 11%. When you compare the stock market returns to other asset returns, you find the equity index holds at 11% while the gains for different assets are much less. Equity accounts managed by ‘professionals’ earn more for all time periods. Costs matter. Over 30 years the difference is stark: 11.06% vs 3.79%. Thus the ‘safest’ investment is a stock index fund that is continuously funded in order to maximize the “miracle of compounding.” Contribute $9 a day, $250 a month and own $2,000,000 in about 40 years. Use a tax-FREE account with a low-cost stock index and pay no taxes on your gains.

https://www.amazon.com/New-American-Retirement-System-Reserve/dp/1461030072

Cut taxes in retirement

If you feel you are paying more tax now than before you retired, consider these options. First, you must pay income taxes on the money you saved in a tax-deferred account at work. You may also have to pay tax on your Social Security benefits. So you may be able to convert a portion of your IRA to a tax-FREE future by staying in your current tax bracket. Your tax preparer can help with this calculation. Second, tax on capital gains is lower than on income so take some gains. Third, consider not selling assets this year. Fourth, plan charitable giving so you maximize your deductions. Fifth, delay taking or making taxable income. Rental real estate or other self-employment is a great way to defer taxation. Sixth, switch investments to non-dividend paying securities that diversify your portfolio. Buffett’s Berkshire Hathaway is one with many different subsidiaries. Market index funds are tax efficient.

https://www.amazon.com/Pay-No-Taxes-Retirement-legally/dp/1507527977/

Employees say they don’t want traditional “retirement”

84% of employees say they want ‘financial independence’ not traditional concept of retirement. 55% say they would give their employer more personal data in return for personal financial strategies. However, employers don’t really want to provide strategies for their workers. They already have shifted the burden of ‘financial independence’ to workers by canceling paid pensions. Now some employers are not even meeting basic fiduciary requirements in their 401k plans. Workers must decide on the amount of contributions for a comfortable future income stream. They must also choose which investment options to use in their savings’ plans. However, because workers are not able or capable of making these complicated decisions, employers are essentially wiping their hands of this responsibility. Actually employers do not want ANY responsibility for their workers future financial success or failure. Workers have had to sue employers just to be fair with their savings plans. Employers sell workers the most expensive version of their company stock, the most expensive mutual funds, and the investment options most beneficial to the plan administrator or broker.

https://www.amazon.com/Robbing-You-Blind-401k-fees/dp/1493588966

Advisor/broker must follow the new communication rules

They can’t lie/misspeak to us anymore:

Includes untrue statements and omissions;
Includes unsubstantiated material statements of fact;
Includes untrue or misleading implications or inferences;
Fails to provide fair and balanced treatment of material risks or material limitations;
Fails to present specific investment advice in a fair and balanced manner;
Cherry-picks performance results or otherwise presents performance in a manner that is not fair and balanced; or
Is materially misleading.

They have to keep a record of what they communicate by any means. The modernization of archaic regulations has seen digital platforms enter the SEC’s jurisdiction, and compliance demands are about to increase drastically. They can still talk a great game so we may need to record a call.

?**********ACCOUNTABILITY**************?

Like 1776, this period is a test of democracy—We rejected an "American fascist" once

The Path to Dictatorship: 2010-2030

Jan 21 2010 Corporations’ election-spending unlimited

Nov 2020 Wealthy discredit election process

Nov 21 2020 Trump’s Plans for a Coup: criminal

Nov 21 2020: Trump plan: US Marshals seize voting machines

Jan 6 2021 Direct assault failed: guns & bombs ready

Trump engaged in a "criminal conspiracy" to stop Biden

“I don’t f—ing care that they have weapons”

Trump was “detached from reality”

Trump used mafia-style intimidation on the defenseless