It's not uncommon for me to meet with prospective clients who have a large concentration of company stock in their retirement account. Even though they've heard of stories of devastation such as WorldCom and Enron, they feel that their company is different. And maybe it is. In this article I won't argue for diversifying a concentrated position of company stock, but I will bring up a provision of the tax law that may allow for a more favorable tax treatment on the sale of this company … [Read more...]

In our last article, we discussed the importance of having at least one IRA account that is protected from market losses.  This is because Required Minimum Distributions happen each year after age 72 and RMD's will require the liquidation of investments, which could be down in value.  Since the IRS allows the satisfaction of an RMD from any IRA account, and investor could satisfy the RMD or ALL accounts from the IRA account that did not lose money. In this article, we’ll dig into … [Read more...]

You may be familiar with one of the risks that you face in retirement called the "sequence of return risk". This is the risk that you will have an unfavorable series of negative returns (especially early in retirement) AND simultaneously distribute money to cover your regular expenses.  This causes these investment accounts to run out of money much sooner than anticipated. Fortunately, there are many ways to avoid the sequence of return risk if a retiree needs regular income from a … [Read more...]

I had a recent client case which I thought was worth sharing which is illustrative of when it can be advantageous to take a lump sum over a monthly pension. Roger and Ingrid (not their real names) are ages 60 and 67, respectively. Ingrid is retiring this year and Roger plans to continue to work for another six years until his full retirement age. Ingrid, working for Kaiser Permanente, has an option of taking either a monthly pension or a lump sum. When we reviewed the options, the … [Read more...]

In our previous articles, we introduced the Buckets and Tools Approach to Retirement Planning. In essence, we categorize each dollar available for retirement among the four necessary priorities of liquidity, income, protection from premature death and long-term care, and growth. After providing enough money for emergency reserve and short-term goals (the liquidity bucket), the next most important priority is covering the income gap that exists between predictable income and … [Read more...]