End-of-Year Thoughts On Retirement Planning

Here are just a few thoughts I want to share at year's end. First, I would direct you to the post I wrote this time last year, My Year-End Review and Planning Regime, about steps you might want to take for a year-end review. As I warned then, don't bother being overly precise with your adjustments. This isn't an exact science.

I recall one reader whose adviser was suggesting she sell stocks and incur taxes just to correct an asset allocation by a percentage point or two. The process isn't that precise. It's impossible to know with any accuracy what your asset allocation should be unless you have a crystal ball that tells you next year's asset class returns. (If you do have a crystal ball, just allocate 100% of your assets to the asset class that will outperform all the others. But first, call me.)

I suspect that most retirees overthink the year-end adjustment process.

Next, President Trump signed the SECURE Act last week [1]. The age to begin RMD's was increased from 70.5 to age 72 beginning in 2020. However, "Americans who turned 70.5 years old in 2019 will still need to withdraw their required minimum distributions this year, and failure to do so results in a 50% penalty of their RMD", according to Jamie Hopkins, the director of retirement research at wealth management firm Carson Group.

Also, annuities can now be offered in 401(k) plans, though it may be a while before they actually become available. Thirdly, stretch IRAs are no longer available.[2]

Not everyone is convinced that the changes are dramatic. “The SECURE Act is a nice thing — anything we can do on a bipartisan basis in this day and age is something of value — but my sense is the changes in the act are really quite modest,” said Alicia Munnell, director of the Center for Retirement Research at Boston College and a columnist for MarketWatch. 

I won't write yet another post on the topic because there are so many out there. Here are some links in the references below and recommend that you start with Mike Piper's excellent piece at The Oblivious Investor.[3]

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