Social Security, Index Funds and Bonds

I’ve been sending out a free, comprehensive retirement newsletter every Sunday for the past 4 years. This labor of affection includes three hand-picked articles on retirement planning, in addition to general interest pieces on finance, health and media. I also share links to precious research tools and model portfolios of the week.

You can take a have a look at this latest newsletter and join for it Here.

Today I desired to share with you a number of the retirement highlights from last week.

1. Not everyone can delay claiming Social Security

For many, delaying Social Security until age 70 is the optimal strategy. It allows the very best monthly profit that protects us from the danger of outliving our money. In one Recent studyBut the Center for Retirement Research at Boston College found that many retirees simply cannot wait.

The study found a connection between an individual’s income and once they claim Social Security.

“Research shows that a person’s income plays a large role in the decision to retire. People in physically demanding jobs who may feel like they can no longer work also tend to earn less and could benefit greatly from delaying their benefits—if only they could. Workers who have the luxury of procrastination often have relatively comfortable or well-paying office jobs or do work that energizes them rather than tires them out.”

2. Index funds could face federal scrutiny

Morningstars
MORNING
John Rekenthaler has a superb one Piece on the opportunity of federal supervision of index funds. Of all of the things that need regulation, passive, low-cost index funds aren’t certainly one of them. It’s like trying to manage sunlight on a windy day.

And I’ll offer you three guesses as to which regulator could be regulating them: the Federal Deposit Insurance Corporation. Yes, the identical FDIC that regulates the banks.

According to the article,

“Among the board’s proposals is an investment moratorium that will immediately prevent any organization that owns greater than 10% of a bank’s shares – in practice meaning Vanguard and BlackRock
BLACK
BLK – from purchasing additional shares to determining their everlasting policy by the FDIC. Presumably, this directive would add specific rules to the present, very general requirement that if investors exceed the ten percent threshold, they have to accomplish that “passively.”

This suggestion jogs my memory of President Reagan’s famous saying: “The nine most terrible words in the English language are: ‘I’m from the government and I’m here to help.'”

3. Individual bonds vs. bond funds

I’m often asked whether retirees should spend money on bond funds or individual bonds. Individual bonds may appear safer because an investor can decide to hold the safety until maturity, thereby avoiding losses. In contrast, the worth of bond funds can rise and fall, as we’ve seen in 2022. Of course, the worth of individual bonds can rise and fall, but owning a person bond gives the investor more control.

As Bob French noted in a superb commentary ArticleBoth individual bonds and bond funds serve vital purposes. According to him, individual bonds are ideal if you have got a necessity for money at a certain cut-off date. In contrast, bond funds are an important technique to add exposure to a diversified portfolio like bonds 3-fund portfolio. It’s actually much easier to rebalance a portfolio with bond funds.

4. Tax-efficient ways to spend retirement savings

One of my articles The newsletter explained the order wherein a retiree should spend their different account types. The traditional rule of thumb is to spend from taxable accounts first, then traditional accounts, and eventually Roth accounts. However, research shows that this is nearly never the optimal approach.

Instead, the optimal approach is usually to allocate spending across two or more account types in a given retirement 12 months. The goal is to smooth out tax liability over retirement. Research has shown that spending first from taxable accounts allows traditional accounts to construct and might generate significantly higher taxes when required minimum distributions begin. Additionally, an optimal strategy can address the hidden taxes on Social Security advantages, IRMAA payments, and even the lack of ACA credits.

5. Don’t just walk, walk backwards

The advantages of each day walking are well-known. What is maybe less known are the advantages of walking backwards. In this Scientific American articleThe creator states that walking backwards “moves the joints in the opposite direction; This uses different muscle groups than usual and takes some of the strain off the knees.”

If you are wondering what this text has to do with retirement planning, just wait. The day will come once you understand.

6. How to store your vital documents

Finally, I introduced a free tool from Fidelity that means that you can store vital documents within the cloud. Called FidSafeThis tool not only stores vital documents, but additionally includes tools that allow your family members to access them within the event of your death.

That’s it for this week. You’ll find rather a lot more there Newsletter.