I’m a little tired of reading about how “buy and hold” is dead, and diversification doesn’t work, and how “target-date funds don’t work,” and that there was too much risk, especially for pre-retirees, in these balanced funds. These stories seem to continue regardless of what’s going on in the real world.
So I won’t discuss much. Instead, here’s some math.
There’s a savings vehicle in which all earnings, appreciation, and interest can be free of income tax forever. If the rules are met, there’s no RMD to be taken, no income tax due on withdrawals, and, while the account assets are included in your estate, withdrawals by your beneficiaries can also be tax-free. It hasn’t been available to everyone because of income limits, but it soon will be.
I’m speaking about the Roth IRA, of course. Until now, higher-income taxpayers ($100,000 modified adjusted gross income or higher) couldn’t convert their savings from a traditional IRA to a Roth. But that’s about to change.
There are only two reasons you appear on the cover of Time magazine—either you are receiving plaudits from the media, or you’re about to be tarred and feathered. 401(k)s are featured on the cover of Time this week, and it’s not because they’ve been named “plan of the year.”
Should you invest differently given the impending retirement of tens of millions of baby boomers? This is a question I’ve received from advisors and investors in recent weeks, and one which, quite frankly, I’ve given little thought to throughout the financial crisis. (It always seemed like a topic of conversation when the Dow was at 14,000 and not at 7,000.)
This comment on Steve Utkus’ recent post about retirement struck a major chord with me:
“Our children’s incomes are not increasing, and they have their own children to support, let alone saving for their own retirement. No one is to blame or is being stingy; we simply must plan for and take charge of our own later years.”
