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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: Steve Felix who wrote (21994)	2/28/2015 12:06:34 PM
From: JimisJim	1 Recommendation Recommended By Mannie Read Replies (3) \| Respond to of 34328

My father got crushed by RMD and his refusal to accumulate the coming year's RMD cash during the previous year and was thus forced to sell a significant amount of stock at rock bottom prices. I had told him for several years prior to that to begin accumulating "next year's" RMD cash during the current year to at least be able to sell at times of his choosing vs. forced sales -- he also did not see the value in divvy/income investing until last year when he complained to me that his remaining PF didn't generate enough cash anymore. That's when I gave his PF an analysis and left him with 24 specific suggestions divided roughly in half between what was underperforming total-returnwise and watch/buy list of good divvy/income stocks that would generate the amount of cash he desired and leave some room for total return growth and income growth... he turns 90 in June. My takeaway plan as I've built my hybrid DGI/IG portfolios has been to practice what I preach -- the year I turn 69, I will stop reinvesting dividends automatically until I accumulate the amount of cash I estimate I'll have to withdraw to satisfy RMD requirements, reinvesting only the cash that exceeds (if any) my estimated RMD for the next year. Only seems to make sense. However, I am reading more and more pieces that suggest the more successful my DGI/IG portfolios are, the more likely my RMDs could grow to the point where I may have to begin selling pieces of positions anyway. If so, the excess will go into taxable accts. I'm still trying to figure out the tax ramifications of my portfolios' growth over time. Obviously the best solution would have been to go with a heavy dose of Roth accts. My problem was procrastination and I always seemed to let the tax pmts. for conversions scare me off as I rarely had a lot of extra cash just laying around to pay taxes on conversions and didn't want to cannibalize the IRAs to pay the taxes. In retrospect, I should have done it anyway and may still.

To: Steve Felix who wrote (21994)	2/28/2015 2:47:08 PM
From: E_K_S	1 Recommendation Recommended By Mannie Read Replies (2) \| Respond to of 34328

Re: RMD Does a partial ROTH transfer fulfill the requirement of the RMD? If so, I would think the strategy would be to start to do partial ROTH transfers before your first RMD, then in place of cash out RMD's, do an equivalent ROTH partial transfer and use excess fund in ROTH to pay the required tax. Then there really is not a 'forced' sale as you can transfer the stocks. To satisfy annual income needs and taxes, you would sell stocks in the ROTH and/or some of the stocks in the IRA. The goal is to build up the ROTH from the IRA, satisfy any RMD requirements and use the ROTH to generate your 'tax free' income stream. Then w/ Social Security, pension and/or other guaranteed income streams use this money to make required annual expenses (property taxes, utilities, food, medical & home owner's insurance, etc). Any short falls can be made up from the income generated in the ROTH. FWIW just received my statement from my Home mortgage company that my last monthly payment is April 2015. Mortgage is now paid off! I still must make home owner insurance payments and property taxes. My goal was to have the home paid off if/when my monthly health insurance exceed $700/month. . . and that has occurred. No more mortgage but that money now goes to the monthly health premiums. I also paid off the HELOC I used to buy and fix-up my rental (tri-plex). My rental property now has no mortgage on it so this revenue stream (after expenses) will go to pay the taxes due from my taxable portfolio and to pay the tax on any partial ROTH transfers I make from the IRA. I have also been making more income investments that are 'tax efficient'. 35% of the taxable portfolio is made up of about 19 income generating MLP's. I also have about 5% of ROC (Return of Capital) monthly paying preferreds. I also own TAL that pays quarterly that is also ROC. The nice thing w/ ROC stocks is that there is no tax event until you sell the stock. Your cost basis is reduced by the amount of the dividends you received during the year. This way you can better time when you want to take the capital gain tax hit and even off set that with a capital loss. Lastly, I have been buying some distressed Bonds that mature out 2-5 years. The interest earned is taxable in a taxable account but tax deferred in IRA and tax free in a ROTH. The nice thing I can time the maturities out so if/when these bonds pay off, I can have some large lump sums hit the different accounts. Just be sure to hold the more risky bonds in your taxable account and less risky in the IRA and/or ROTH. If the senior bond payoff is less than PAR, you can write off that loss against any other taxable income and/or capital gain. If held in an IRA or ROTH you get no benefit from that loss. Therefore, I have found that part of my investment decision (especially for the taxable account) is to consider tax efficiency. MLP's and ROC assets work well to meet this objective. Just be sure to understand the risk/reward in each investment and stay diversified to avoid the possible 'black swan' or 'land mine' event. EKS