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The Best of What They Said and I Read week ending 4/30/2017

Short excerpts from articles I found interesting.

I may not agree with the author and the following material is not intended as investment advice.

 Kiplinger’s Retirement Report – May, 2017 – Fraud

  • “Top Scams.  The Federal Trade Commission has compiled its list of last year’s top scams.  For the first time, imposter scams, in which a scammer pretends to be someone trustworthy to persuade a consumer to send money, surpassed identity theft in number of complaints.  Debt collection remained the top complaint for the second year in a row.  The top three states for fraud and other complaints were Florida, Michigan, and Georgia, while Michigan, Florida, and Delaware ranked as the top three for ID theft.  If you’ve been the victim of a scam, report it at FTC.gov.”

 Barron’s – April 29, 2017 – Profit Gains Lift Dow 1.9; Nasdaq Rises 2.3% -  by Ben Levison

  • “Taxes got the attention last week, but it was the alchemy of earnings and elections that spurred stocks to their best week in months.  The Dow Jones Industrial Average climbed 392.75 points, or 1.9%, to 20,940 last week, its best week since December 2016. The Standard & Poor’s 500 index gained 1.5% to 2384.20, its best week since January, while the Nasdaq Composite jumped 2.3% to 6047.61, its first-ever close above 6000.”
  • "The week got off to a rocking start, with the Dow leaping 216 points on Monday following the relatively benign results in the French presidential election—benign because only one radical anti-European candidate made it through to the second round…”
  • …Still, it wasn’t that the week was without its downers. Donald Trump’s tax plan lacked details, and failed to get the market moving, while first-quarter gross domestic product data was even worse than expected: The U.S. economy grew just 0.7%, below economist forecasts of 1%.”

 MarketWatch – April 28, 2017 – It’s harder than you think to spend down your 401(k) account in retirement by Alicia H. Munnell

  • “At a recent conference, retirement experts concluded that the lack of an easy drawdown mechanism in 401(k) plans was the major challenge facing the 401(k) system…”
  • “One way to help may be to put more emphasis on the Required Minimum Distributions (RMD), which the IRS requires when individuals reach age 70½ and each year thereafter. The IRS does not claim that the RMD, which is intended to collect deferred taxes, is the basis of an optimal draw-down strategy. Yet an RMD approach satisfies four important tests of a good strategy.”
  • “First, it is easy to follow. The IRS requires withdrawal percentages based on tables of life expectancies. Such a withdrawal schedule can be calculated for younger ages based on the same life tables used for the RMD rules...   Second, the RMD strategy allows the percentage of remaining wealth consumed each year to increase with age, as the retiree’s remaining life expectancy decreases. Third, consumption responds to variations in the value of the financial assets, because the dollar amount of the drawdown depends on the portfolio’s current market value.  Finally, it reduces the incentive to chase dividends.”
  • "In a 2012 study, researchers compared the RMD approach with 1) other rules of thumb (such as living off the interest, basing withdrawals on remaining life expectancy, or taking out 4% each year) and 2) an optimal draw-down strategy that maximizes a household’s utility from consumption. The results of the horse race showed that the RMD strategy did ok. And it has the good features mentioned above.”

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