How to Sequence Withdrawals in Retirement Financial planning expert Michael Kitces discusses strategies to help retirees (raising, best)

[mathjak107]

qlacs are one of the worst products for retirement planning in the opinion of quiet a few financial researchers.

they accelerate rmds once they kick in making the tax problem worse.

kitces on qlacs

“the unique nature of a longevity annuity’s payment structure is not very hospitable as an RMD deferral strategy.

The fact that it can take until a retiree’s late 80s just to break even and recover principal means the retiree risks significant foregone growth by trying to merely defer RMDs through the use of a QLAC.

And of course, the RMDs will still eventually happen anyway, as the QLAC merely defers when payments begin.

In fact, ironically, if the retiree does live, the accelerated payments of a QLAC in the later years can actually deplete an IRA even faster than normal IRA RMDs would have anyway!




https://www.kitces.com/blog/why-a-ql...md-obligation/

[mathjak107]

Originally Posted by Lizap

Nicely said, MJ!

studying the various portfolios has always been a hobby of mine ever since i read harry browns book in the 1980s WHY YHE BEST LAID PLANS IN INVESTING USUALLY GO WRONG .

so i always have a lot to say about diversification and portfolio construction .

it has been said that unless one owns an asset class that looks like it’s a poor choice at that time with no chance of coming out of it , then you are not diversified…

if on those huge stock rally days nothing went down then you are not diversified ….

but depending what we want to be diversified about we may want different asset classes .

like i said , in my accumulation stage being diversified meant large cap stocks , mid caps , small caps , maybe foreign stocks and emerging market stocks .

the was no need to mitigate temporary short term dips with other asset classes , and permanently reduce long term gains .

so that was my wealth creation period … a lot of swinging for the fences with aggressive investing .

now that i made the bulk of my money i am in the capital preservation stage and draw down stage .

but cash instruments are not capital preservation at all, they have been losing money via inflation for decades no matter what the rates are .

they count on catching a higher rate in a cd and picking a moment where rates and inflation fall so they can be a head for a period …but it is usually offset by poor timing and also being locked in when rates rise .

happened to my cds i bought last year at under 3% and are just coming due .

so it takes other assets that respond reliability to the major economic outcomes .

will they always respond reliably? yes …but will all economic scenarios play out the same reliably ? no …

like last year ,all assets were down …because in tight money no assets do well but tight money itself is not a major economic outcome either .

right now we are teeter tottering between stages of the cycle so no assets are really running with the ball .

so the key players have always been the same 4 assets ..

equities

gold

long term treasuries

cash instruments/ short term treasuries.

most other asset classes are just hybrids of those four .

like foreign stocks are pretty much stocks but they reflect a different return for us whether the dollar is weak or the dollar is strong .

well that is nothing that isn’t duplicated already by equities and gold since gold is tied to the dollar .

gold in india when converted to their currency has soared since 2020 by 72% .that is about 24% a year


in dollars gold is up 8.50% cagr .

many assets investors use only complicate and confuse the portfolios defensive assets .

then the portfolio takes a big hit in a down market and they can’t understand why since they felt they had all this diversification with foreign stocks and bonds and reits and high yield and corporate bond funds ,etc.

this was harry browns reasoning 50 years ago for the permanent portfolio concept .

harry was brilliant and almost clairvoyant as in his books he spelled out exactly how things would react well in advance of the future .

he said 50 years ago that in situations where we are in between the next major outcome stage nothing will do well .

he also realized that diversification has a price .

so he always stated one should use his concept as a core but decide how much money to devote to what he called the variable portfolio where you time things to your hearts content , or still swing for the fences or search for the next group like FAANG .

i use his concept for about 88% of my invested dollars up from 80% and 12% in a 100% equities model .

i am even toning down the total market fund in that core . so far i swapped about 25% for berkshire with a target of about half in berkshire and half in the total market fund.

berkshire is actually like a mutual fund. not a single company .

i also bought a small position in the permanent portfolio fund itself .

it differs from harry’s do it yourself 4x4 by holding slightly different assets .

it was founded decades ago by harry brown and terry coxin . it has been run for decades by michael cuggino a well known face on cnbc

for the expense ratio you get a lot of costly assets to hold .

it holds its own gold as an example , no 3rd party etfs . or it holds its own swiss francs


Right now, PRPFX is 20% gold, 5% silver, 10% Swiss Francs, 15% real estate and natural resource stocks, 15% aggressive growth stocks, and 35% dollar assets like long treasuries ,short treasuries , cash ,etc

so it is a defensive fund and the worse the dollar and equities market does the better prpfx does.

the fund is more geared for the dollar and stock market not doing well as well as higher inflation then the harry brown 4x4 which has equal dollars bet on all outcomes but really thrives in a lower inflation lower rate. environment.

so you can have diversification even in the permanent portfolio concept where you can weight for lower inflation or prpfx for higher inflation

[mathjak107]

for those interested , here are harry’s books

keep in mind some of these books were written almost 50 years ago .

i mean look at some of these titles .you would think they were written today.

one in particular caught my eye CROSSING THE LINE . about immigration from mexico ..how did he know …ha ha



https://www.thriftbooks.com/a/harry-browne/198332/

[mathjak107]

i still have my original copy of why the best laid investment plans usually go wrong .

it still sells used for up to 50 bucks.

inflation proofing your investments was one of the first books he wrote with terry coxin .

together they started the permanent portfolio fund in 1982 which is now prpfx run by michael cuggino.

later on the 4x4 as it is called was brought to light in the book why the best layed investment plans usually fail.

it was simpler and more neutral weighted then the fund which is geared for higher inflation

[Wile E. Coyote]

Originally Posted by mathjak107

same , as our portfolio grew over the last 8 years our draw as a percentage has fallen closer to 3%

3% is mo better

[mathjak107]

well , 3% of a higher balance is more then 4% of a lower balance at this point.

so it’s growing the money for 6 out of the last 8 years that did that

[lieqiang]

Originally Posted by ddeemo

Forcing to recharacterize RMD money as income does mean having to pay taxes on it though - what you do with the money is another matter.

No, it doesn't. It is treated as ordinary income, whether you may or may not actually pay taxes on depending on your situation.

[Wile E. Coyote]

Originally Posted by mathjak107

well , 3% of a higher balance is more then 4% of a lower balance at this point.

so it’s growing the money for 6 out of the last 8 years that did that

Who knew spending less would result in a higher balance

[mathjak107]

except we were spending more percentage wise with the lower balance .

so spending has grown higher over time but the portfolios have grown at a much faster rate reducing the percentage those dollars drawn represent even though we are pulling out more today .

so let’s change what you said to “ who knew you could spend more money in dollars down the road and it’s a smaller draw rate then you started .”


that is the beauty of investing …

odds are you are up 2/3s of the time and down only 1/3 …

and as long as the up years are much greater then the down years one can be down but there is little effect

looking at a plain vanilla portfolio ,a 60/40 using vti and bnd has averaged just under 7% a year since i retired in 2015 including the crappy years.

100k in that 60/40 in the year i retired grew to 173k today , however if we sub gold for bonds in that 60/40 so we have 60% vti and 40% gld we have 204,500….

the 40% equities golden butterfly grew to 153k

80% wellesley and 20% gold 154k

wellesley alone was 151k.

so this is why 90% of the time frames one ended with more than they started and 2/3’s of those 122 thirty year cycles you ended with double what you started despite the draw to live on .

[Wile E. Coyote]

Originally Posted by mathjak107

except we were spending more percentage wise with the lower balance .

so spending has grown higher over time but the portfolios have grown at a much faster rate reducing the percentage those dollars drawn represent even though we are pulling out more today .

so let’s change what you said to “ who knew you could spend more money in dollars down the road and it’s a smaller draw rate then you started .”


that is the beauty of investing …

odds are you are up 2/3s of the time and down only 1/3 …

and as long as the up years are much greater then the down years one can be down but there is little effect

looking at a plain vanilla portfolio ,a 60/40 using vti and bnd has averaged just under 7% a year since i retired in 2015 including the crappy years.

100k in that 60/40 in the year i retired grew to 173k today , however if we sub gold for bonds in that 60/40 so we have 60% vti and 40% gld we have 204,500….

the 40% equities golden butterfly grew to 153k

80% wellesley and 20% gold 154k

wellesley alone was 151k.

so this is why 90% of the time frames one ended with more than they started and 2/3’s of those 122 thirty year cycles you ended with double what you started despite the draw to live on .

Nah! The whole point of a percentage is that it is a consistent number. 3% is less than 4% period end of story. But, nice try.