L1: types of investment vehicles for 72(t)Is it possible to use interest payments from CD”s or money market accounts for 72(t) payouts assuming that the interest payments are equal to or less than the 120% mid term rate for the applicable start date?2006-07-04 07:22, By: Rick M., IP: [64.222.126.141]
L2: types of investment vehicles for 72(t)
If you are asing whether you can merely take the interest payment payment and call it a SEPP, the answer is no.

You can do a calculation of the payment amount based on one of the three acceptable options for 72(t) – see the calculator page.

As long as the payments made by the plan are equal to the calculated payment amount, the payments can come from interest, principle or both just make sure that the annual distribution matches the planned annual distribution.

2006-07-04 08:17, By: Gfw, IP: [172.16.1.75]

L2: types of investment vehicles for 72(t)Hello Rick:
Short answer: YES. The IRS holds no provenance over and does not care how the corpus of the IRA is invested as long as it is invested in permissible investments. Things such as cars, artwork, stamps, coins, etc. are not permitted. Everything else, including CDs are acceptable.
However, right now, the highest permissible distribution for a 55 year old is approximately $6700 per annum per $100,000 of IRA; or, approx. 6.7% of the total IRA. I know of no CD rates or money market rates that are that high; most are hovering around 5%.
TheBadger
wjstecker@wispertel.net
2006-07-04 08:25, By: TheBadger, IP: [66.109.211.254]

L2: types of investment vehicles for 72(t)Interesting Observation:
Both Gordon & I read the same question; interpreted the question differently. He starts by saying NO and I started by saying YES.
Both answers are correct
TheBadger
2006-07-04 08:28, By: TheBadger, IP: [66.109.211.254]

L2: types of investment vehicles for 72(t)Another interesting observation:
Many questions about the tax code can be answered by YES, NO or IT DEPENDS.
At least “one” of the answers will be correct.
2006-07-04 10:36, By: Gary T, IP: [24.145.246.118]

L2: types of investment vehicles for 72(t)Let me answer from a CPA perspective.
1. The investment vehicle is immaterial. The income/interest/dividend earnings are immaterial. If the income/interest/dividendsdo not provide enough cash, then you must use principal by selling something if you don”t have “leftover” cash. You “could” not even invest it, but still must make the calculated annual distribution. You cannot just distribute whatever income your investments provide, and think you have satisfied the required distribution, which is a calculated amount irrespective of the investment earnings.
2. The important consideration is if there is adequate cash and cash flow to be able to make the required distributions each year. It is not necessary to make distributions more frequently than annually, and they don”t have to be paid every month or quarter. Sometimes the interest/dividend payments are not enough to provide adequate cash every month.
3. The above factors are good reasons not to invest a SEPP 72-T in real estate where the cash flow may not be enough for the required distributions.2006-07-04 15:03, By: dlztaxes, IP: [4.175.9.220]

L2: types of investment vehicles for 72(t)Thank you all for your perspectives. Let me try to clarify what I am thinking and see if my thought processes are in line with the IRS requirements.
Hypothetically if I were to invest $100000.00 in an IRA 5 year CDthat paid 5.34% and the 120% mid term rate is 6.08% could I set up the SEPP where I took $5340 annually (the exact amount of interest being earned) and be within the legal guidelines of the IRS?
I believe that I would have to fund the IRA amount with the exact dollar amount that would generate the $5340 by one of the three calculation methods and to do so would eat into the principle and thus negate being able to use a CD for this scenario. Thoughts anyone? Thank you.

2006-07-04 16:22, By: Rick M., IP: [64.222.126.141]

L2: types of investment vehicles for 72(t)From my first post…

If you are asking whether you can merely take the interest payment payment and call it a SEPP, the answer is no.
Start by going to the calculators and enter your age, your IRA amount and the current interest rate – it will tell you the three possible payment alternatives. Also note, that depending on your age, the SEPP period may well exceed5 years.2006-07-04 16:52, By: Gfw, IP: [172.16.1.70]

L2: types of investment vehicles for 72(t)Rick :
I think everyone understands the approach you are suggesting, and we have all told you that you can”t do that. In your scenario, you would be REQUIRED to withdraw $ 6,080 per year even though your CD earned only $ 5,340. Therefore, you would have to keep $ 740 in uninvested cash for each year until the later of5 years or59 1/2 in an account that was included in the SEPP 72-T plan. This means that a minimum of $3,700 would have to be uninvested to cover the minimum 5-year period, and possibly more if you start before reaching 59 1/2.
Of course, you have to be careful if you invest in a CD shorter than 5 years because you might not be able to reinvest the proceeds when the CD matures into another CD with the same or higher interest, and then could be short for your required distribution. In that case, you would have to reinvest less than the full $ 100,000 in order to provide the extra cash needed to cover the interest income shortfall.
If you took your scenario to the ultimate absurdity, you could not invest the amount set aside for the SEPP 72-T, and then under your plan you would not have to distribute anything either. The IRS won”t permit that. They require distributions based upon the applicable asset amount, not the income earned.
2006-07-05 08:32, By: dlztaxes, IP: [4.175.9.139]

L2: types of investment vehicles for 72(t)Good morning Rick and all. Hope everyone had a fun and safe 4th.
I agree with TheBadger … yes you can do what you are describing. Here”s why.
The upper limit on interest rate factors is, “no more than 120% of the FMR.” You can take less and that sounds to me like what you are asking. But there are cautions, some of which have been touched on, and I want to hit one too.
TheBadger assumed your age 55, which is significant. If you buy a 5-year CD then I will assume your age is atleast 55, and the 5-year minimum time for 72(t) distributions will be the controlling factor in your situation. The danger you would face if your age is less than 55 is interest-rate renewal risk when the 5-year term for the CD expires. You can”t be assured that you will get the same rate when you renew, so you will have to use another stratege for investing to complete the time element for your required distributions. Remember that you can”t add or remove funds to your CD investment IRA to generate the same dollar amount of distributions when the interest rate changes after 5-years.
Good luck.
Jim2006-07-05 09:43, By: Jim, IP: [70.184.1.35]

L2: types of investment vehicles for 72(t)Jim – lots of assumptions. If it does work, it is only by accident and has nothing to do with the SEPP distribution amount even if the two amounts are identical.
Regardless of the underlying investment, the amount of the annual payment must be calculated based on one of the 3 acceptable methods using (age, interest and mortality)and not jsut interest only.2006-07-05 10:05, By: Gfw, IP: [172.16.1.70]

L2: types of investment vehicles for 72(t)Gordon. I agree with you that my answer has a lot of assumptions. So I guess that my comments should have been prefaced with “in theory” it will work. If the bank will give a variable rate towhat”s offered; if the bank will allow some excess income to accumulate within the CD; if the bank will agree to distribute only the calculated 72(t) amount and not force out the total interest earned; and I”m sure there are others.
I ran the reverse calculator for a 55-year old and distribution of $5,340 per year ($100k X 5.34%). The closest I could get was putting $100,048.42 into the SEPP and assuming 3.29% (don”t have to use the full 120% of AFR)to produce the $5,340. So, can you get the bank todecrease the interest they pay you to match $100, 048.42 you need toinvest and pay out $5,340 per year? What if you could get the 5.34% on the $100k, but only take $5,300 per year and have $40 accumulate within the account? Now you have a whole new set of calculations to deal with.
Enough. In theory it might work but in practicality it”s a nightmare and probably unworkable.
Jim2006-07-05 14:32, By: Jim, IP: [70.184.1.35]

L2: types of investment vehicles for 72(t)Thanks again everyone for your input. Jim you actually hit on the main point of my question.
“The upper limit on interest rate factors is, “no more than 120% of the FMR.” You can take less and that sounds to me like what you are asking.”
That is indeed what I was asking and what I assumed. With 120% of the FMR at 6.08%, I figured that I could pick any percentage less than that and “match” up the payout with that percentage and be within the guidelines. I may be wrong but how could the IRS question a percentage of less than the 120% rate even though the dollar amount generated would be equal to the payout requirement. I do realize that I may have to adjust the CD amount slightly where it is not exactly $100,000.
I am 55 so a 5 year CD would not come due until after age 59 1/2 and I could keep my principle fully intact and guaranteed for the next 5 years while still taking a SEPP.

2006-07-05 15:09, By: Rick M., IP: [64.222.126.141]

L2: types of investment vehicles for 72(t)Rick:
The problem is “matching” all of the elements. Like Gfw said, you must use one of the three calculation methods to determine the annual distribution amount. Each year your total distribution must be within $1.00 of the calculated distribution. As I stated in my last post, the closest I could get to your desired distribution was within $48.00 of the $100k. 5.34% of this increased figure for what the bank will pay / distribute to you, you have to re-calculate the assumptions. This will be an (almost) never ending puzzle trying to “match” the numbers. Unless you have some flexibility in rates the bank will pay or some way to retain the income within the IRA as you distribute the 72(t) calculated amount, you will have a really tough time making it work. I”m not saying it won”t work, but it will be really difficult to make happen.
Become very familiar with the calculators on this web site.
Good luck.
Jim2006-07-05 16:37, By: Jim, IP: [70.184.1.35]

L2: types of investment vehicles for 72(t)What we have here is a failure to communicate???
Rick can potentially have any of three objectives:
1. Invest $100,000 somewhere; what is his maximum annual distribution?
2. Invest $100,000 in a bank CD yielding exactly 5.34% or $5340 per year. Can this be his SEPP distribution amount?
3. Invest an unknown amount to receive a $5340 SEPP distribution per year. What is the amount?
Based on age 55; therefore a life expectancy of 29.6 and 6.08% as 120% of the mid-term applicable federal rate:
1. $7363.
2. Yes, by adopting the amortization method and assuming an interest rate of 3.294% which is less than or equal to 120% of the MT/AFR.
3. $72,523
Maximizing one’s annual distribution always creates the question or friction of “where do I get the cash each year in order to actually make the distribution; presumably without depleting the corpus of the IRA?” Conversely, is it worthwhile to over-fund the IRA (in this case by $27,477) in order to achieve a specified annual distribution AND insure that the corpus of the IRA is not depleted? There is no right answer here and each taxpayer is left to his or her own devices and decision-making. Some of us, let’s say the more risk-prone advocate maximizing the annual distribution or similarly targeting a specific annual distribution and only funding the IRA to the required dollar amount. Others, let’s call them more risk-adverse, desire to preserve the IRA corpus and only take an annual distribution amount that insures the safety of the IRA. These folks are the one’s who will invest in matching-term CDs, buy US Treasuries or zeroes, or purchase an annuity.
TheBadger
wjstecker@wispertel.net2006-07-05 17:49, By: TheBadger, IP: [66.109.211.254]

L2: types of investment vehicles for 72(t)I think it has been illustrated that the CD vehicle can be used if all the calculation requirements are met and matched with the interest payment. It involves more elements that much work correctly than the typical 72t arrangement, and becomes akin to threading a needle. But I don”t think I would try it unless the CD issuer was fully on board, understood 72t requirements including 1099R coding etc. A bank with marketing smarts could offer a “72t CD product” that could distribute principal as well as interest without an early withdrawal penalty, and the ability not to be limited to interest would make me feel more comfortable if I was the client considering using a CD product for a 72t. I think a local bank where you can talk to decision makers and get assurance on these matters would be a must. I”d hate to hash out problems with a CSR unit in India come next March.2006-07-05 19:27, By: Alan S., IP: [24.116.165.157]

L2: types of investment vehicles for 72(t)Rick M.,
The CDs are a good choice for a conservative 72t portfolio.
You can sleep at night and you won”t have to come back to this forum in less than 5 years and ask questions about what to do next because your72t just busted because the stock or bond market went south.
And by the way, there are currently CDs with a yield of 6.75% available for a 25K investment; look around.
gus
2006-07-05 21:24, By: gus, IP: [70.110.180.224]

L2: types of investment vehicles for 72(t)Bill:
Thanks for listing the options so clearly. You have demonstrated that Rick”s problem can be solved, allbeit with a lot of work. I guess you have your own “Reverse Calculator” that will accept 3 decimal places. I could only get 2 places into the calculator on this site.
Gus:
When you say, “…because your72t just busted because the stock or bond market went south,” I assume that you are assuming the investments funding an IRA for 72(t) arestocks and bonds and the value goes to zero, thus causing a “bust” of the 72(t). By IRS definition, total collapse of the underlying investments cannot cause a 72(t) to “bust.”
Jim2006-07-06 09:25, By: Jim, IP: [70.184.1.35]

L2: types of investment vehicles for 72(t)NO !!! NO !!! NO !!!! NO !!!! BE CAREFUL WITH TERMINOLOGY !!!
We all know that the IRS speaks a different language, and here in SEPP 72-T land is a perfect example. In the financial/investment/business world, “BUSTED” means going broke, i.e. to -0-.
In the SEPP 72-T IRS world, “BUSTED” means only that you violated the terms of the plan by withdrawing more than $ 1 too much or too little based upon the proper calculated amount, or by depositing additional funds into the SEPP 72-T account (other than earnings). That is what the IRS, and the experts on this forum, mean by “busting” the plan, which is different from the plan going “bust”.2006-07-06 12:32, By: dlztaxes, IP: [4.175.9.7]

L2: types of investment vehicles for 72(t)Hey Jim,
Yeah, I forgot about that recent ruling; thanks for reminding me.
However,I still don”t think that the “bust” posters areso relieved when they findout about it that they suddently forget all about the failure of theirinvestment choices that ultimately got them to $0.00.
Furthermore, I have yet to see a 72t that was primarily funded with guaranteed obligations go bust. Have you?
Yes I know that old cliche “You gotta keep up with inflation; right?” If that theory is an absolute, then I guess the busters are OK because 3% per anumon $0.00 is definitely $0.00.
Please do not take my response the wrong way as it is not targeted toward any individual responses in this post and all of your responses have been greatly apprecited over the past few years. However, I am just a no-risk person and I am simply stating that (in my opinion) it is OK for others to select a no or low-risk portfolio if they can”t take the heat and uncertainty of the stock market and/or bond investing.
My motto is “It”s better to live on a little less than have nothing at all.”
Best regards,
gus
2006-07-06 20:03, By: gus, IP: [70.110.180.224]

L2: types of investment vehicles for 72(t)Good morning Gus.
Thanks for your comments and, no, I didn”t take anything the wrong way. Some folks are investors and some folks are savers. Investors are willing to take some degree of risk within their portfolio, expecting to have an opportunity for greater return on their money than is available in fixedincome vehicles. Savers are not willing to take any risk and they are really limited to bankCD”s and guaranteed fixed annuities. Whatever approach someone takes is totally up to them and their ability to deal with the volatility of their investments. “One size” does not fit all.
I agree with you that a CD investment at the bank will probably not go to $0.00. I have to insert “probably” because no investment is void of all risk. But you can generally rest well with bankCD”s.
But I have a question for you. You stated that you knew about CD”spaying 6.75% for a minimum $25k investment. Is this with a bank or is it through a brokerage service? I have looked at the high-yielding CD”s available through brokerage firms, including my own,and have chosen not to deal with them. They are usually “callable”with long-terms, and if closed out early there”s a fairly large cost to sell, and I don”t mean broker commission, but you can only sell at a steep discount to purchase price. So this type CD is laden with risk that conservative investors should really understand.
Thanks again for your comments.
Jim2006-07-07 10:45, By: Jim, IP: [70.184.1.35]

L2: types of investment vehicles for 72(t)Jim:
I think you might have a misconception about long-term callable CDs. If a CD is called by the issuer, it is called at full face value (or slightly higher @ 101 or 102). You are correct that if you sell it before maturity, and interest rates have risen, then you will probably receive less than full face/maturity value. However, since you are considering a 5-year CD to cover the SEPP 72-T period and until after 59 1/2, there should be no reason to be concerned about having to sell the CD before the 5 year maturity date.
If you are concerned about the possibility that you may run into a financial situation requiring you to need some or all of these funds before 5 years, then you should consider buying 4 CDs each for $ 25,000, and setting up 4 separate SEPP 72-T accounts/plans. That way, if you had to sell one of the $ 25,000 CDs, you would only take the loss on that one CD, and if you had to bust that one SEPP 72-T plan, then you would not have the cumulative 10% penalty on the distributions on $ 100,000, but only on the distributions from that one $25,000 plan.2006-07-07 11:40, By: dlztaxes, IP: [4.175.9.43]

L2: types of investment vehicles for 72(t)Like Jim, I was thinking that this high yield might be from a brokered CD. If called and subsequently reinvested at a lower rate, the 72t distribution would have to continue. In some cases, this couldrequire withdrawal of principal. With a bank CD this withdrawal would be hit with a loss of interest for the early withdrawal penalty, but a brokered CD would have to be sold in the secondary market with possibly a fee and loss of principal.
On the more positive side, it should be noted that as of April 1st, CDs are protected by FDIC insurance for up to 250,000 IF they are in an IRA account. Still only 100,000 in a taxable account. This would cover default, but not loss of principal due to early sale on the secondary market per above paragraph.
2006-07-07 11:47, By: Alan S., IP: [24.116.165.157]

L2: types of investment vehicles for 72(t)Jim, dlztaxes and Alan,
You are all correct in your assumptions about the 6.75% CD. Yes, it is callable and yes it is a 20 year CD and yes, it could be called depending on the interest rate situation so if one wishes to venture into this type of committment, they better have their thinking cap on first!
First, let me say that the interest rate of these offering doesn”t fluctuate in direct proportion to the typical hikes in interest rates. An expample would be that when they were at their lowest, you could still easily get one of these CDs at a 5.50% yield. So were are talking about the possibility of a 1.5%projected fluctuation here. Anyone contemplating using these types of investments had better not go into it blindly; however, I believe that suggestion holds true, even more so, with higher risk investments.
When I retiredearly from mycompany about 4 years ago, I left at the same time as 4 of my co-workers and they all opted for either an 80-20, 70-30 and/or 60-40 portfolio mix and,they each chose to let someone handle their investmensts for a small annual fee of 2% of their entire portfolio wheras I chose to handle my own investments which costs me approximatelt $37.00 per anum in IRA fees. Now their situation didn”t sound to bad until you add up the costs of their advisor fees, which varies between $10,000 and $20,000 per year for each of them. And if you compound the fact that”all of them” are now complaining about theirinitial investment dollars “shrinking” and their worries about how they are going to sustain their current income going forward, confirms that I made the right choices for my risk tolerance.
All of you responses are typical concernswith regardto buying long-term CDs; however, what strikes my really funny is that all of theconcerns about placing your money in a medium risk (or higher) portfolio ar hardly ever discussed and I am not referring to this forum when I say that. The general assumption is that the money will be recovered when the market “comes back.” However, if anyone takes that as gospel, then I got a great piece of swamp land I can sell you that will be worth 1000 times your original investment once the water is drained!
My response is rather long so I aplogize; however, I mus tell you that I did explore going with Morgan Stanley befor I decided to do my own investing. So I had this investment advisor (he had all kinds of certfifcations) provide me with his recommendation and I asked him to put it in writing. Now I have kept that plan and here are the results of it to date if I would have gone with Morgan Stanley:
Starting investment: 1.2 million (70-30 portfolio mix)
4 year growth: 40,000 (does not include any adjustment for financial advisor fees)
Monthly withdraw: 0
Here”s my current plan:
Starting investment: 1.2 million (CDs and gov”t obligations with an average yield of 6.10%)
4 year growth: 48,000 (includes adjuments for my IRA fees of $37.00 per year)
Monthly withdraw: 5,250
Now I understand why my friends are worried about their future survival; however, they all have the support of their individual advisors because each one of them tell me “Its gonna be OK once the market turns around.”
In closing, and with all of the above said I must say that all of you (TheBadger, GFW, Jim, dlztaxes and Alan) are directly responsible for educating me to the point where I felt comfortable enogh to “do it myself”; therefore, I am forever grateful to all of you!
Thanks so much guys,
gus 2006-07-07 22:52, By: gus, IP: [70.110.206.172]

L2: types of investment vehicles for 72(t)Hello gus:
In general, I applaud your thinking on two counts: one, for some one with some patience & skill and a willingness to learn at least the basics or investing; then there is really no need to pay 1% to 2% of your total portfolio value in investment management fees; two, while working, one”s 401(k) plan and/or IRAs are probably best invested in growth, growth and more growth; conversely, when retired and commencing a 72(t) plan, these same accounts take onnew task masters or objectives; growth isn”t necessary gone but it probably moved to 2nd or 3rd place behing capital preservation and cash generation.
It sounds as though you have designed an investment plan that meets these needs and equally meets your risk tolerances. That said, this board is really about the tax issues and alternatives in the design of 72(t) plans. What are you doing in this regard and is your 72(t) planning / thinking as acute as your investment plan thinking?

TheBadger
wjstecker@wispertel.net

2006-07-08 08:39, By: TheBadger, IP: [66.109.211.254]

L2: types of investment vehicles for 72(t)Not to be defensive, but my responses had to do with the tax aspects of the SEPP 72-T, and how to avoid “busting” the plan by not having the cash to make the calculated required distribution.
As to the investment philosophy, I agree completely with the last response, but from a different (tax) perspective. Whenever possible, retirement investments after retirement should be at least 65% or more in fixed interest investments. Even more if you have equity investments outside of your retirement accounts. For tax reasons, remember that all distributions from retirement plans (including IRAs) are taxed at ordinary income tax rates. So, if you have stocks in a retirement plan, the growth (as well as the investment) will be taxed at 25%-35%. That same investment outside of retirement accounts will be taxed at -0- on the amount invested, and 15% (or 5% for lower income taxpayers) on the growth (which is the reason for investing in stocks). However, ROTH IRA investments should usually be in stocks because they will never be taxed to the taxpayer, spouse, children, or grandchildren if kept at least 5 years in the ROTH IRA.2006-07-08 16:46, By: dlztaxes, IP: [4.175.9.159]

L2: types of investment vehicles for 72(t)Hello TheBadger and dlztaxes,
Sorry I went off on a tangent so I”ll be to the point this time.
I”m in the fourth year of my 72t with minimal g2006-07-08 21:44, By: gus, IP: [70.110.214.109]

L3: types of investment vehicles for 72(t)Can”t get rid of that last partial post for some reason…
Hello TheBadger and dlztaxes,
I”ll concentrate more on the structure of my 72t this time.
In preparation for establihing my 72t, I frequented these forms for about two years prior to implementing it. I also bought your book, participated in the forums (always asking), and made note of any significant responses that could affect my situation. I also constructed a detailed 72t plan in writing and sent it to my IRA custodian. This letter included everything in GFW”s model plus additional information like earlist termination date (which I alsoobtained from GFW”s calculator). I did all this because GFW (and yourself) always tried to drive the “paper trail” point home (and you both still do).
So i”m in my fourth year of withdrawls from my 72t plan and, as you stated, capital preservation is my primary goal along with a steady income stream and I have about 3% of my assets reserved (in a money-market account) just in case one of my CDs is called and I have to supplement my income for that month; however, I do have a littleextra moneyset aside forunavoidable circumstances.So if everthing continus as it has for the past four years, the SS money I”ll be collecting when I”m 62 will be just “fun money” and my wife already has her sights on a new Jaguar to help spend it. And no, I will not deferSS because I want to spend as much of that money as I can before I embark on another adventure. In closing, I can only say that I couldn”t have done it without this forum and your guidancein the book.
gus825702006-07-08 22:08, By: gus, IP: [70.110.214.109]

L2: types of investment vehicles for 72(t)Hello TheBadger and dlztaxes,
I”ll concentrate more on the structure of my 72t this time.
In preparation for establihing my 72t, I frequented these forms for about two years prior to implementing it. I also bought your book, participated in the forums (always asking), and made note of any significant responses that could affect my situation. I also constructed a detailed 72t plan in writing and sent it to my IRA custodian. This letter included everything in GFW”s model plus additional information like earlist termination date (which I alsoobtained from GFW”s calculator). I did all this because GFW (and yourself) always tried to drive the “paper trail” point home (and you both still do).
So i”m in my fourth year of withdrawls from my 72t plan and, as you stated, capital preservation is my primary goal along with a steady income stream and I have about 3% of my assets reserved (in a money-market account) just in case one of my CDs is called and I have to supplement my income for that month; however, I do have a littleextra moneyset aside forunavoidable circumstances.So if everthing continus as it has for the past four years, the SS money I”ll be collecting when I”m 62 will be just “fun money” and my wife already has her sights on a new Jaguar to help spend it. And no, I will not deferSS because I want to spend as much of that money as I can before I embark on another adventure. In closing, I can only say that I couldn”t have done it without this forum and your guidancein the book.
gus825702006-07-08 22:11, By: gus, IP: [70.110.214.109]

L2: types of investment vehicles for 72(t)This will be post # 28. Let”s see if we can crack 30!
Gus,
Congratulations (sincerely) on your efforts to learn and create a plan that is sound as far as 72(t) is concerned, and that fits your needs and investment risk / volatility tolerance. When I meet with a potential new client, I always ascertain their abilities to perform their own investment decisions and if they truly need my advice. When I find someone that doesn”t need my advice, I congratulate them and send them on their way since there”s no need for them to waste any money paying me when they are fully capable of doing it themselves. Again, Gus, too you I am happy you have been able to construct and work with your plan that fits your personality and needs. However, at the end I”ll toss out something for you to consider.
I find it interesting that when your retired there were a total of 5 (you and 4 others) who retired at the same time. 80% (4) chose to use an advisor and 20% (1 – you) chose to D-I-Y, and so far so good. This fits into the 80 /20 rule of the generalpopulation of folks who either can”t or don”t want to do what you have done by learning and managing your own financial matters. You (the 20%) can save the expenses of advisor and transaction fees, but the 80% must incur these costs to satisfy their personalities. Regardless of which road one chooses, 100% of the folks are “right.” Now for one item I want you to consider in your plan vs the other 4 plans.
Over the last 4 years, you have “won” by being in a fixed income environment. The market has been going down with some recovery lately during this time period. You won by not losing. Your friends have lost, so far, because of the actions of their investments over this time period. And their losses are real dollar losses. Will they recover? Only time will tell. But assuming normal market actions and enough time, maybe they will, and they could even surpass your investment plan. Who”s right? You are all right because it fits into your individual risk tolerance and plan. But the biggest question is should all 5 of you remain static in your initial investment? Probably not. What worked before ususally doesn”t work forever without some changes … either minor “tweeking” or major overhaul. Just don”t “go to sleep at the switch” and let things rock along without monitoring and managing.
Finally, I”ll end on one last note. DLZ, I do not agree with your blanket statement that after retirement a portfolio should be 65% fixed income. Portfolio construction depends on the risk / volatility tolerance and overall objectives the person is trying to accomplish. For some, the fixed income figure is 100% while for others it is really small like > 10%. For example, I have a 94-year old gentleman whose portfolio (about $2.0 million) is 95% equity at his direction over the years. No, I didn”t create this situation as he has been investing for most of his life and he has always been really comfortable with this situation. He is paying for all nursing home expenses and other expenses, and has plenty of assets for the rest of his life. His objective is to create wealth for his son and his three grandchildren.  So for him to switch to 65% or greater fixed income would not be appropriate for him.
Gus, keep up the good work.
Jim 2006-07-10 09:52, By: Jim, IP: [70.184.1.35]

L2: types of investment vehicles for 72(t)Jim,
Thank you for an excellent response and to that end, I will leave you with my final response.

1 – I have no plans to change my plan (ever) unless it is to buy more CDs if called or when they obtain maturity.

2# – The plans you described, and how they should be changed periodically, are better suited for future retirement growth. That”s exactly what I did with my 401k investments and my investments grew substantially over a 16 year period and contributing the maximum allowable amount every year didn”t hurt either.

3 – Don”t fall asleep you say?  In addition to taking afternoon naps and sleeping well through the night; I also check on my investments every month by reading the statement that is mailed to me.  Well, to be truthful, I don”t even read it (other than the bottom line) and then I just file it away.

Remember the old Ronco products?  Ron Popiele is selling a new portable oven that has a sales slogan that fits my retirement strategy.  And the slogan is  “Just set it and forget it… now what could be more simple than that?”
Also I”m old enough to remember Alfred E. Neuman aka. “What me worry?”
Thanks again to everyone; now its nap time.
gus82570
  2006-07-10 12:08, By: gus, IP: [70.110.143.225]

L2: types of investment vehicles for 72(t)Great discussion, Gus et al.  And now I”ll “stick a fork in it and call it done” as this will make comment # 30.
Jim 2006-07-10 13:38, By: Jim, IP: [70.184.1.35]

L2: types of investment vehicles for 72(t)Thirty doesn”t rhyme as well as thirty-one,
So now we can finally say we”re really done !!!!! 2006-07-10 15:13, By: dlztaxes, IP: [4.175.9.177]