1.31.2020

The Clinton legacy

So we're going to get essentially another Clinton impeachment acquittal: he did it, but we're not going to remove him because it's not that serious and he's kinda popular.

Thanks for the precedent, Bill!

1.29.2020

Will retiring Boomers cause a stock market decline?

I've seen this argument before: Boomers are going to start liquidating stocks in retirement.

However, if you look at the distribution of ownership of stocks/401ks/IRAs, I think you'll find that a few rich hold a LOT of stocks, enough to live off dividends without liquidating.

The broad masses have little or no stocks and will work longer and/or live off Social Security and home equity. It's only those in between we need to worry about liquidating, those with a few hundred thousand dollars in 401(k)s.

Are there that many non-rich that hold enough stocks to impact the market when they sell? Sure doesn't look like it.

Now sure there are traditional defined-benefit pensions too, but public pensions are still growing and underfunded, and need to keep accumulating. Private pensions are relatively small and hold low stock allocations.

So where is this generational liquidation going to come from? I just don't see it.

1.28.2020

Greenspan's Body Count: unknown UK woman

MortgageStrategyUK:
One of the respondents offered the following story:“It has been a difficult time for our family, my wife is now on medication for depression. The stress of being trapped in a mortgage and struggle to manage monthly has had a devastating impact.

“My sister, who was in a similar position, [had a] marriage end as her husband could not manage financially. She sadly committed suicide in June. We have no doubt the mortgage mess they were in played a huge role in her mental health deterioration.”
Greenspan's Body Count stands at 267.

1.23.2020

Tax-efficient investment placement

Everyone who does retirement planning thinks about about asset allocation. But often overlooked is the importance of tax diversification. It's a good idea to have all three categories of account (taxable, tax-deferred, and tax-free Roth) so that when you retire you'll be able to draw from whatever accounts make the most sense based on (currently unknowable) future tax law and your future tax bracket.

But efficient planning goes beyond just having some money in all three account types. It also matters where you put different types of investments. Charles Schwab has a good article on tax-efficient investment placement here:

As a general rule, investments that tend to lose less of their return to taxes are good candidates for taxable accounts. Likewise, investments that lose more of their return to taxes may be better suited for tax-advantaged accounts. Here’s where you might consider placing your investments:



Everyone knows not to put munis or annuities in a tax-deferred account, but not everyone thinks of putting REITs in a Roth. REITs aren't taxed at the corporate level, because they pay out a required portion of their earnings as taxable (ordinary income) dividends. But if you get those dividends in a Roth, they're never taxed. The higher ordinary income tax rate on REITs makes a Roth (and, to a lesser extent, a traditional tax-deferred account) even more advantageous for REITs than it is for stocks.

There is one area that Schwab's article misses: foreign stocks (and funds and ETFs of foreign stocks).  They should be in your taxable accounts, because you get part of your dividends withheld as tax by the companies' home countries. In a taxable account, you get a credit against your US taxes for the amount withheld. In a Roth, those withheld dividends are lost forever. And even in a traditional tax-deferred account, reclaiming withholdings can't be done until you take distributions and requires decades of record-keeping. It's so cumbersome I suspect few retirees bother.

When choosing your asset allocation, also remember to choose the right accounts!

Gavin Newsom's executive order contradicts his public statements

Gavin Newsom's insane new executive order commands Californians to stay in their homes "until further notice" "except as...