Home > Successful retirement strategies, part 2

Successful retirement strategies, part 2

March 23rd, 2018 at 12:50 am

OK, so the 1st 2 classes of this 3-part program have been reviewing very basic concepts (dollar cost averaging, asset allocation, diversification, etc). Here and there are glimmers of things that interest me but he's got so much ground to cover we haven't lingered on any one thing too long.

Surprisingly, our instructor is not a big fan of annuities, immediate or variable (or insurance products in general), because you hand over control over a large chunk of money, on the insurer's terms, and they are, after all, in the business of making money. So I considered this a good sign.

He is, of course, emphasizing that tax-free money is the best kind of money, and so he likes Roth IRAs and muni bonds.

Our "homework" assignment in the 1st class was completing an extensive survey of our current assets/investments and when we plan to retire, etc. I turned it in today. He said each of us would get a free 1-hour consultation with him, so I will be very curious what recommendations he may have for me. I have no muni bonds in my portfolio.

I probably should investigate ETFs, which we talked about in passing.

I guess the final class will be most interesting.

2 Responses to “Successful retirement strategies, part 2”

  1. Dido Says:

    I'm glad to hear he's not pushing the annuities.

    While munis are tax-free (federally; they are only tax-free to the state if you have muni bonds from your own state), they are of limited benefit if you are in a lower tax bracket. If you will be in the 12% bracket for 2018, then a bond that earns, say, 3% interest tax-free is equivalent to earning 3.41% if you are in the 12% bracket but equivalent to earning 4.76% if you are in the 37% tax bracket, so they are of much greater benefit to those who are in higher brackets. (The calculation is interest rate divided by (1 - tax bracket expressed in decimals), so divide by .88 for the 12% bracket and by .63 for the 37% bracket.

  2. Dido Says:

    ETFs are very similar to mutual funds. Possibly lower fees, but also possibly not. The big advantage is for those who are trying to limit capital gain distributions (line 2a on the 1099-DIV). ETFs are less likely to distribute cap gains than mutual funds are. If you aren't worried about them, no real gain to moving funds from a mutual fund to an ETF.

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