vol. 29, issue 6 june 2018 retirement watchbob carlson’s

Retirement WatchBOB CARLSON’S Strategies for a Secure Future

Vol. 29, Issue 6 June 2018

Dear Reader:When I scan the media, pessimism

almost always seems to be prevailing. There’s a big market for negativity.

We recently passed the 50th anniver-sary of the publication of Paul Ehrlich’s bestseller “The Population Bomb.” Ehrlich argued that global population growth was out of control, and the planet couldn’t support it. In a few years, he forecast there would be mass starvation, declining life expectancy and island nations disappearing under the waves.

Ehrlich continued a long tradition that dates back at least to Thomas Malthus and continues today. Yet, the pessimists always have been wrong. Ehrlich famously lost a bet with

economist Julian Simon in which Si-mon wagered that specific measures of quality of life would improve over the following 10 years.

Pessimists also tend to dominate the financial news and usually are wrong. The periods of economic calamity aren’t as frequent as pessimists predict and don’t last. Even people who make a lot of money after forecasting bad markets often miss the recoveries and bet things will continue to worsen. You might have seen recent media reports that hedge fund manager John Paul-son, who made billions of dollars bet-ting the housing crisis would happen, has had poor investment returns since and is losing clients.

It is important to seek out analysts

and information that disagree with the prevailing pessimism. Writers who recently have documented how things generally are improving include Matt Ridley, Thomas Sowell, Greg Easter-brook and Steven Pinker.

Things aren’t perfect, of course. We’ll have recessions and bear markets, and there are other problems. But the economy grows more often than it shrinks, and investment markets rise more often than they fall. You won’t maintain financial independence by being pessimistic most of the time. The best strategy is to maintain balance and diversification and reserve the negativity for the periods that really warrant it.

4 Trusts That Still Improve Your Estate Plan after Tax Reform Why bother

with trusts when less than 1% of estates will pay estate or gift taxes?

Many people are understandably, but mistakenly, thinking that way. Traditional-ly, tax savings were the primary reason to use trusts. But in 2018, individual estates

worth up to $11.18 million are exempt from estate and gift taxes. Thanks to the portability provision, a married couple can escape taxes on two estates worth up to $22.36 million.

Tax savings used to be the driver of most estate plans, causing people to ignore or downplay the other benefits of trusts. Yet, there still are significant non-tax benefits to several traditional estate planning trusts.

You ignore these trusts at your peril.A venerable tool is the qualified termi-

nable interest property (QTIP) trust. The QTIP is created in the will of the first

spouse to pass away. To qualify as a QTIP, the trust has to have four characteristics. All income earned by the trust must be paid to the surviving spouse at least annually. The surviving spouse can require the trustee to

(Continued on page 2)

Avoid the Pitfalls of Retirement Plan Rollovers . . . 3

When an IRA Conversion Makes Sense . . . . . . . . . . 5

The Hidden Tax That Snags More Retirees . . . . . . 6

Protecting Your Social Security Benefits . . . . . . . . 8

Should You Be Debt-Free in Retirement? . . . . . . . . 9

Some Green Lights Are Turning Yellow . . . . . . . . . 10

Balance & Diversification Help in Markets . . . . 11

The Aging Excuse . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

In This Issue

Actions to Create the Retirement You DesireJune 2018 2

invest for income. Principal of the trust can be paid to or for the benefit of the surviving spouse if the trustee determines the annual income isn’t adequate. Finally, the first spouse to pass away can name the benefi-ciaries who will receive the remaining trust principal after the surviving spouse passes away.

The QTIP has tax benefits for those who might be subject to the federal estate tax. The amount put in the trust isn’t included in the estate of the first to pass away, be-cause it qualifies for the unlimited marital deduction. It is included only in the estate of the surviving spouse.

More importantly, the QTIP has non-tax benefits.

A key benefit is the trust assets are protected from creditors of the surviving spouse until they are distributed. The assets also are safe from scams and from plead-ing children. Plus, you can designate an independent trustee to invest and manage the trust assets.

Another reason people use a QTIP is that it allows them to provide for the surviving spouse while ensuring the remaining property eventually goes to their preferred beneficiaries. You can designate the beneficiaries so the remainder won’t be diverted to a subsequent spouse or to someone who persuades the surviving spouse to direct the money elsewhere.

There are other provisions you can put in the QTIP trust, if you prefer. The trustee can be allowed to distribute annually to the surviving spouse the greater of 5% of the trust assets or $5,000 in addition to the

annual income and any additional prin-cipal distributed for the spouse’s benefit. Also, you can allow the surviving spouse to

decide who eventually receives the remain-der of the trust.

The bypass trust is another standby of estate planning, also known as a marital deduction trust or A/B trust, among other names.

Traditionally, the bypass was used to en-sure you took full advantage of the lifetime estate tax exemption and that the rest of the estate passed to your surviving spouse tax

free under the marital deduction. Typically, the will stated that a portion of the estate equal to the lifetime exemption was put in the bypass trust. The rest of the estate passed directly to the surviving spouse.

Most people don’t want to follow the

traditional strategy now, because the entire estate would go into the bypass trust and nothing would pass outright to the surviv-ing spouse. But there still are good reasons to leave a portion of your estate to a bypass trust.

The bypass trust will provide for your surviving spouse while giving you more flexibility than the QTIP. You can give the trustee more discretion in choosing the in-vestments and the amount to be distribut-ed each year. Or you can set a distribution schedule you prefer.

The bypass trust also will protect the assets of the trust just as the QTIP trust will. Its assets should be out of the reach of creditors, crooks, relatives and others, as well as poor investments.

As with the QTIP, you can control who eventually inherits the trust remainder, or you can give the surviving spouse the power to change the beneficiaries.

A potential downside of the bypass trust is that when the beneficiaries inherit the remainder, they don’t get to increase the basis of the assets to current fair market value. Instead, they take the same tax basis the trust had. That might not mean much, if the trust isn’t in existence for long or buys and sells assets with some regularity. But if assets are held by the trust for a long time and appreciate, the beneficiaries could have significant tax bills when they sell.

The family trust is an even more flexible vehicle with many variations.

The main goal of the family trust is to provide for your children or grandchildren, but without giving them control over the

Bob Carlson’s Retirement Watch™ (ISSN 1077-3924) is edited by Robert C. Carlson and published monthly by Eagle Products, L.L.C., 300 New Jersey Ave, NW, Suite 500, Washington, D.C. 20001, Customer service: 800-552-1152. E-mail: [email protected]. Website: www.RetirementWatch.com. Subscription cost is $99 annually. Copyright 2018 by Eagle Products, L.L.C. POSTMASTER: Please send address changes to Bob Carlson’s Retirement Watch, Subscriber Services Department, P..O. Box 1901, Williamsport, PA 17701. Postage paid at periodical rates at Centreville, VA and additional mailing offices. The information in this newsletter is from sources believed reliable, but no guarantee or warranty is made as to its accuracy. The editor, owners, and publisher, as well as their clients, employees, associates and/or family may have positions in securities and instruments recommended or reviewed in this newsletter. The editor and publisher assume no liability for the reader’s use of the information contained herein. Letters and e-mail from readers are encouraged. Editor: Robert C. Carlson; Editorial Director: Paul Dykewicz; Group Publisher: Roger Michalski.

Tax savings used to be the driver of most estate plans, causing people to ignore or downplay the other benefits of trusts.

The main goal of the family trust is to provide

for your children or grandchildren, but without giving

them control over the property.

www.RetirementWatch.com June 2018 3

property. The family trust often is consid-ered when one or more of the children are young, not financially responsible or so-phisticated, might have creditor problems, or might have substance abuse or gambling issues. The trust also can prevent your assets from being part of an adult child’s marital estate that is split up in a divorce.

You have a lot of flexibility with these trusts. You might decide one child should be a trust beneficiary, while the others inherit property outright. The trustee can have wide discretion on investments and distributions, or you can set parameters. You can have the trust principal distributed to the beneficiary upon reaching a certain age or some other benchmark, or have it remain in the trust for life.

Another trust to consider is the charita-ble remainder trust (CRT).

You can set this up during your lifetime to benefit both you and your spouse, or you can create it in your will to benefit your spouse. Let’s assume it’s created in your will.

Property or money is transferred from your estate to the CRT. The trust will pay income to your surviving spouse for life or a period of years, whichever you designate. A charity or charities you designated in the trust agreement will receive the remaining trust property after the surviving spouse passes away.

The estate will receive a charitable contribution deduction for the present value of the property the charity is expect-ed to receive in the future. Most estates won’t need that deduction. (If you set up the trust during your lifetime, you receive an income tax deduction.) Since the trust

eventually benefits charity, it receives the money tax free and can sell it without incurring any taxes. The full value of the property is invested.

So, the CRT provides for both your sur-viving spouse and the charity or charities of your choice. As with the other trusts, the CRT protects the trust principal from creditors, scams and children or other rela-tives. It also ensures the remaining property eventually goes to the beneficiary of your choice.

Most charities will administer the trust and manage the investments for little or no fee if they are at least one of the eventual beneficiaries.

You can choose from two different methods of determining the income distributions.

Under the annuity method, the CRT pays a fixed amount each year to the sur-viving spouse. There’s no inflation protec-tion, but there is guaranteed annual income for life or for as long as the trust lasts.

Under the unitrust method, a fixed percentage of the trust value is distributed each year. The annual distributions can rise or fall each year with the value of the trust assets. If the investment returns exceed the annual payout percentage, the value of the trust increases and the annual distributions also increase. But if the trust value declines, the distributions decline.

Under either method, the distributions are likely to be a combination of interest, dividends, short-term capital gains, long-term capital gains and principal. So, the taxable amount of the income is likely to vary each year.

Those are four classic trusts that still provide valuable benefits, even when estate taxes aren’t an issue.

Avoiding the Pitfalls of Retirement Plan Rollovers Rollovers are

the most frequent retirement plan transactions and the ones

most likely to have costly mistakes.About 62% of retirees with

substantial assets in 401(k)s and similar plans roll the accounts into IRAs, according to recent surveys. Rollovers far outnumber regular contributions to IRAs.

You might be aware of the “fi-duciary rule” the Department of Labor issued a couple of years ago.

The main reason the rule was is-sued is government officials were concerned that people were making mistakes when rolling over 401(k)s. A court invalidated the rules earlier this year, but many firms adopted them already and the Securities and Exchange Commission is drafting a

As with the other trusts, the CRT protects the trust principal from

creditors, scams and children or other

relatives. It also ensures the remaining property eventually goes to the

beneficiary of your choice.


version.You don’t need the fiduciary rule

to ensure your 401(k) and IRA rollovers are executed in your best interests. Instead, use my two-step process. The first step is to deter-mine if a rollover is the best strategy for you. The second step is to ensure the rollover is done correctly to maximize your after-tax balance.

When leaving an employer, you generally have these options for your 401(k) account: leave your money in the account (though a few employers still discourage this); transfer it to the 401(k) plan of a new employer, if its plan allows; take the distribution in cash; or roll over the account to an IRA.

You first want to evaluate the 401(k) plan to determine if leaving the money there would be the best move. The details of 401(k) plans vary considerably. Many small- and medium-size employers and some large employers don’t have very at-tractive plans. Their expenses aren’t as low as they could be. They have limited investment options. The funds offered often aren’t among the best available in their categories, and only a few investment categories are offered. There also might be limits on how often changes can be made in the investments and when money can be taken from the plan.

In general, though, 401(k) plans have been improving and many are very good, especially at large employers. Costs can be low, especially when the plan offers investments in institutional share classes of funds.

An employer that takes its 401(k) seriously seeks out the best funds in each asset category, offers a wide range of asset categories instead of just the basic five or so, and might work with investment firms to design target date plans or similar asset allocation funds that are better than the off-the-shelf products at most fund families. The

401(k) also might have a brokerage window that allows you to invest in most or all of the investments available through the broker. The 401(k) further may have a stable value fund available. Some investors find such a fund to be an attractive alternative to bond funds and money market funds.

A potential negative factor is that staying with the 401(k) might prevent you from consolidating your invest-ment assets at one financial services firm or limit your choice to one firm.

Don’t forget the long-term factors.Examine the distribution options

for both you and a beneficiary. Some 401(k) plans offer limited ways to take distributions, while others offer the same flexibility as most IRAs. The choices for beneficiaries might be more limited than for IRAs. I recently received an email from a widow who was told that she if she didn’t roll over her late husband’s account to an IRA within a limited time, it would be

distributed in full. 401(k)s are starting to offer lifetime

income options, such as annuities. While you generally are limited to only one choice, a large 401(k) plan often negotiates a little bit better payout than you would receive on your own.

It is a good idea to check on a former employee’s ability to make changes in an account, communicate with the plan sponsor and receive communica-tions regarding the plan. Some plans conduct most of their communications through their active employee systems. Sometimes former employees believe they are out of the loop.

If you’re changing to a new employ-er, compare the 401(k) plans of the new and old employers. You probably want to roll over the old account to the new account, if the new employer has a good plan and allows the rollover.

When the 401(k)s aren’t good, the alternative, other than taking a distri-bution of the entire account, is to roll it over to an IRA.

Shop around for an IRA. The fidu-ciary rule was issued because govern-ment officials believed people were making one of two expensive errors. Some departing employees roll their 401(k)s to IRAs maintained by the administrators of the 401(k) plans without shopping for better deals. Others are persuaded by effective marketing to roll their 401(k)s over to investments the government officials consider unattractive because of high expenses and reduced flexibility.

Factors to consider before choosing an IRA include: investment options, fees and the different ways you can

You don’t need the fiduciary rule to ensure

your 401(k) and IRA rollovers are executed in your best interests.


access the account. Take a look at the list of fees charged for all services. Some IRA custodians offer “no-fee IRAs,” meaning they don’t have annual maintenance fees, but charge a fee for most transactions.

Evaluating 401(k)s and IRAs can involve processing a lot of informa-tion. Here’s an easier way to make the decision. First, decide the types of assets you’re likely to invest in and the transactions you’re likely to make in the future. Then, decide which vehi-cle is going to be the best fit for your likely future needs. This way, you don’t have to worry about features you don’t expect to use.

Once you decide to do a rollover, your work isn’t finished. Be sure the rollover is done correctly. A mistake at this point could cost you more than any excess fees and commissions.

You could have the plan make a check out to you. Then, you’d have up to 60 days to deposit the final account balance in a qualified IRA or employer retirement plan. You don’t want to do that. The 401(k) administrator has to withhold 20% of the account balance for federal income taxes. You’ll get that back after you do a successful rollover and file your income tax return for the

year. But in the meantime, you have to come up with that 20% and include it in the rollover, because you have to roll over the gross account balance to make the rollover tax free.

Also, if you fail to make the rollover within 60 days, the distribution is included in your gross income. You’ll owe income taxes and, if you’re under age 59½, a 10% early distribution penalty, too.

You might be confident of making the rollover, but a lot can go wrong. You could be in an accident, get sick, have a family emergency, or lose track of things. Also, you could do every-thing right only to have the new custo-dian put the money in the wrong ac-count. All of these things and more have happened to people. The IRS can waive the 60-day requirement if there was a reasonable cause, but the IRS doesn’t waive the requirement very often.

Generally, you’ll receive a waiver only if one of the firms involved in the rollover made a mistake, you were free of fault and you did every-thing you could to correct the mis-take immediately after you learned or should have learned about it.

The better approach is the trust-ee-to-trustee transfer. Have the administrator of the plan you’re leaving transfer the money directly to the new IRA or employer plan. You’ll first have to open the new IRA or other account. Then, complete a form directing the IRA custodian to initiate having the funds transferred from the old account. The IRA custodian will contact your 401(k) plan administrator and be sure the account is transferred.

In either case, follow up and read the paperwork or online account in-formation closely. Be sure the correct amount of money is deposited in the right account. Firms sometimes make mistakes such as depositing rollovers into taxable accounts instead of IRAs. You don’t want the hassle of correct-ing this mistake weeks or months after it occurred.

More Scenarios When an IRA Conversion Makes SenseConverting a

traditional IRA to a Roth IRA can make sense in a lot of situations,

especially after tax reform.

Last month we analyzed how tax reform changed the decision to convert a traditional IRA to a Roth IRA. We re-viewed the different factors to consider and showed the results they produced in several different scenarios.

Let’s look at other common situations

that were presented in a recent issue of AAII Journal by William Reichen-stein and William Meyer. One factor that weights heavily in favor of doing a conversion is that income tax rates are likely to be higher in the future than they are today. Under that assumption,

You first want to evaluate the 401(k) plan to determine if leaving the money there would

be the best move.


it can make sense to pay the taxes now rather than later.

The first situation involves someone in her mid- to late-60s. She expects to begin Social Security benefits at age 70. Shortly after, she’ll be taking required minimum distributions (RMDs) from her traditional IRA.

Her tax advisor says she’s in the 22% tax bracket today and will be in the 25% bracket if tax reform’s brackets expire as scheduled in 2026. But a portion of her Social Security benefits will be included in gross income once the required minimum distributions (RMDs) begin. The result is that her marginal tax bracket (the tax on the last dollar of income) will be over 40%. Each dollar of RMD will cause part of her Social Security benefits also to be included in gross income.

It will pay for her to begin converting some of her traditional IRA into a Roth IRA each year before RMDs begin. The Roth IRA won’t have RMDs during her lifetime or cause Social Security benefits to be taxed. Each year, she can convert enough of the IRA to take her to the top of the 22% bracket, though it also might make sense over the long term to convert enough to push her into the 24% bracket. Over the long term, she’s better off paying those taxes now at 22% or 24% instead of later at

40% or higher.These conversions might increase

her Medicare premiums, because of the Medicare premium surtax for higher income individuals. But that would end after the conversions are done at age 70, and it will be less expensive than paying the additional taxes on Social Security benefits the rest of her life.

In another example, let’s look at how a conversion can benefit a married couple, though the real benefits kick in after the first spouse passes away. This retired couple is in the 12% tax brack-et. The new standard deduction, plus the additional amounts for being 65 or older, shelter a lot of their income, which is primarily RMDs and invest-ment income.

After one spouse passes away, the other loses the lower of their two Social Security checks. Most of the other income continues. But the surviving spouse now is single. That means the standard deduction is almost cut in half and the tax tables are different. The result is the survivor now is in the 22% bracket and will be in the 25% bracket if we revert to the 2017 tax tables.

It probably would be less expensive for them over the long term to convert some of the traditional IRA to a Roth IRA while they are in the 12% bracket. That reduces the future RMDs and

could keep the survivor from jumping into a substantially higher bracket.

In our last example, let’s consider a younger person in his early 50s. He’s earning a solid income and putting money in a 401(k). After retiring and especially after RMDs begin, he’s going to be in a fairly high tax bracket. In addition, the RMDs are going to trigger the Medicare premium surtax and taxes on Social Security benefits.

It likely is better for him to begin converting some of his traditional 401(k) to a Roth account each year through age 62. That helps him avoid RMDs in the future. If he has the con-versions completed by age 62, it means the conversions and traditional IRA distributions won’t trigger the Medi-care premium surtax when he enrolls in Medicare at age 65.

These scenarios and our discussions last month show how important it is to analyze the conversion decision instead of relying on broad rules of thumb or gut instinct. It is a long-term decision, and you want to consider all the factors over the years. You also should consider using software such as that available at www.socialsecuritysolutions.com and www.maximizemysocialsecurity.com.

The Hidden Tax That Snags More and More Retirees

A growing number of taxpayers, especially retirees, are being caught in

the estimated tax trap. When income taxes aren’t withheld,

taxpayers have to prepay their federal income taxes in four estimated tax payments. The payments are due on April 15, June 15, September 15 and

January 15 (unless the due date falls on a holiday or weekend). The estimated tax payments are supposed to be spread evenly over the year, unless the income is earned unevenly during the year. States with income taxes have the same


or similar requirements. When timely estimated tax payments

aren’t made, a penalty is imposed. The penalty is interest compounded daily for the period the government didn’t have the money when it should have. The interest rate is set quarterly based on treasury debt rates. Often, people don’t learn they owe the penalty until they file their income tax returns for the year.

The IRS reported that in recent years the number of taxpayers penalized for underpaying estimated taxes climbed. It increased 40% between 2010 and 2015. The number of taxpayers filing income tax returns didn’t increase nearly as much.

There are several reasons for the climb in taxpayers being hit with the penalty, but the major one is the wave of Baby Boomers retiring. Most Americans are used to their employers withholding taxes from their paychecks. After retiring, they often are surprised to learn about their estimated tax responsibilities and the penalty for not making the payments.

Retirees receive investment income from their taxable accounts: interest, div-idends, capital gains, mutual fund distri-butions and perhaps more. There’s no tax withholding on these payments. They also receive IRA and 401(k) distributions and perhaps annuity and pension pay-ments. There’s no withholding on these unless the retiree requests it. The same goes for Social Security benefits.

Retirees need to make estimated tax payments on these and other sources of income, or they will owe penalties.

Fortunately, you can have the penalty abated for the first year of retirement.

A taxpayer who retires or becomes disabled at age 62 or older is eligible to have the estimated tax penalties abat-ed, but only for a year before or after the change. You have to request the

abatement on Form 2210, which is the estimated tax penalty form.

After that transition year, it’s tougher to avoid the penalty.

Taxes have to be prepaid through either withholding or estimated tax payments if you expect to owe more than $1,000 in federal taxes for the year.

Income taxes aren’t the only taxes you have to prepay. Any other taxes report-ed on or with Form 1040 are included in the requirement, including the Medi-care premium surtax, penalties on IRA distributions or other items and payroll taxes on household employees.

The straightforward way to calculate estimated payments is to project your tax bill for the year, divide the total by four and pay that amount in each installment.

The goals are to avoid the penalty and also either a large payment due or refund with your income tax return for the year. The penalty is charged from the day the payment was due until the earlier of the date the tax return for the year was due and the date the payment

actually was made.There are three safe harbors for avoid-

ing penalties. Be sure to qualify for one. • Pay at least 90% of the current year’s

tax liability through timely estimated tax payments;

• Pay at least 100% of last year’s total tax bill through timely estimated tax payments; or

• If you are a “high-income taxpay-er,” pay at least the lesser of (1) 90% of this year’s tax liability or (2) 110% of last year’s tax liability. A high-income taxpayer is one whose adjusted gross income on last year’s tax return was over $150,000 ($75,000 for married individuals filing separately). The other two safe harbors do not apply to the high-income taxpayer.

When income isn’t earned steadily during the year and you want each estimated tax payment to match income for that period, consider the more com-plicated “annualization method.”

Under the annualization method, you compute estimated taxes separately for each quarter. This can be tricky because you do not want to prepay taxes on gross income. You want to estimate the taxable income for the period, which means apportioning exemptions, deductions, losses and other write-offs against the income of each quarter.

When filing your income tax return, IRS Form 2210 is used to show you do not owe a penalty for underpaying estimated taxes. It also can be used to estimate your payments for the year under the annualization method. Go to page four of the form and use the table to compute estimated taxes for each quarter. You will need that information

The IRS reported that in recent years the number of taxpayers penalized

for underpaying estimated taxes climbed. It increased 40% between

2010 and 2015.


anyway when you file the return to show you qualify for the annualization method. After estimating income taxes for the quarter, pay at least 90% of that amount.

The annualization method also is help-ful to taxpayers who had a surprising and substantial increase in income late in the year. The sale of an asset or unexpectedly large mutual fund distributions can in-crease income enough to make estimated payments inaccurate and subject to a penalty unless the annualization method is used.

There is another way retirees might be able to avoid the hassle and uncertainty of estimated tax payments and still avoid penalties.

When taxes are withheld from any

payments to you, the IRS assumes the taxes were withheld equally throughout the year, even if they weren’t. Employees can avoid underpayment of estimated tax penalties by having employers increase their tax withholding late in the year.

The rule applies to withholding from any type of income. You can have taxes withheld from your annuities, IRA distri-butions, or other payments you receive. If estimated tax payments for the year are low or you want to avoid quarterly payments, have enough income taxes withheld on payments received late in the year. Some people wait until near year-end to take their IRA RMDs and have a large part of the RMDs withheld for income taxes.

Before deciding to execute this strategy, check with the payer. Some IRA custodi-ans and others place restrictions on how much they will withhold, such as with-holding a maximum percentage from each IRA distribution or withholding only from regular, scheduled distribu-tions. Others require a minimum notice period to change withholding.

There are several ways to make esti-mated tax payments. The easiest way is to use one of the online options at www.irs.gov/payments.

More details about computing estimated tax payments and avoiding penalties are available in IRS Publica-tion 505, available free on the IRS web site at www.irs.gov.

Protecting Your Social Security Benefits from ID Thieves

Identity theft continues to grow, and your Social Security benefits are a favorite target of

the identity thieves.After the thieves obtain your Social

Security number and other personal information, they apply for benefits in your name, if you aren’t already receiving benefits, and have the money deposited in their own accounts. If you’re already receiving benefits, they try to redirect the benefit payments to their bank accounts.

The Social Security Administration doesn’t release information on identity theft and related incidents involving benefits. But an Inspector General’s report in 2015 sampled some data from 2013. It found that about $20 million in benefits for 12,200 recipients were misdirected to the

wrong bank accounts. That’s less than 2% of online bank deposits of benefits. The IG also found the agency was able to prevent another $6 million belonging to 5,300 beneficiaries from being misdirected.

The problem is only going to get worse as the Baby Boomers continue to reach Social Security eligibility age.

Take steps to protect your Social Se-curity benefits even if you’re not already receiving them. As you approach age 62, the benefits will be attractive to thieves. You need to take preventive actions, even if you don't plan to apply for benefits for years.

The best way to protect your benefits is to set up a MySocialSecurity account on the Social Security web site at www.socialsecurity.gov. The account has a number of features, such as helping you estimate the benefits you’d receive under different claiming scenarios and checking

the accuracy of your earnings history. You’ll also be able to apply for benefits online when you’re ready and take other actions.

Another advantage of the account is that it lets you check any activity related to your Social Security number. If some-one applies for benefits in your name or tries to change your address or the bank account to which your benefits are deposited, you’ll see it in the account.

Once you set up the account, check it periodically to see if there’s been any activity. Contact Social Security if, for example, you see benefits were applied for in your name.

An alternative is to call Social Security’s toll-free number periodically to ask if there has been any activity in your ac-count. You also can ask what your latest estimated benefits are.

When you’re receiving benefits, be


sure your benefits are being depos-ited on a timely basis in your bank account. When a deposit isn’t made, contact Social Security. It could be the first sign that someone obtained your

information and used it to divert the benefits to their bank account.

Social Security is good about restor-ing benefits once you alert them to the theft and convince them you didn’t

authorize the change. But the faster you act and the more steps you take to prevent the theft or catch it early, the easier it will be to resolve the problem and restore your benefits.

Should You Be Debt-Free in Retirement?

Should you try to be debt-free in retirement?

For a long time it was taken for granted that peo-

ple wanted to be debt-free in retirement. People even held mortgage-burning parties and paid cash for everything pur-chased in retirement. Now, more people see no reason to avoid debt simply be-cause they’re retired. There are financial advisors who advocate debt as a valuable financial management tool for retirees.

The near-zero interest rates we experi-enced following the financial crisis were a big incentive for retirees to take on or continue debt. But rates are rising now, and the equation is changing a bit.

There are two perspectives to consider when considering whether or not to have debt in retirement.

The first perspective is the mathemati-cal one.

The analysis from this perspective is fairly clear cut, but still has some fuzzi-ness. You compare the after-tax return you would receive from investing your money to the after-tax interest rate on the debt. It is important to be sure the tax effects are considered on both sides. It is not unusual to see an analysis that considers the tax effects of one side but not the other.

When your after-tax investment return

is higher than the after-tax cost of bor-rowing, then it makes sense to keep your money invested and carry the debt. On the other hand, if the after-tax returns on your money are lower than the after-tax cost of the debt, then the smart move is to use the money to pay the debt.

The reason there’s still some fuzziness to this discussion, is you have to choose the investment rate of return to use.

Most analyses use the long-term ex-pected return from the portfolio or from specific assets. Under that approach, the numbers usually show it makes sense to have some debt.

Many economists disagree with that approach. Paying debt is risk free, they say. When you pay the debt, the obli-gation and the payments are gone. The results won’t change over time with different circumstances.

But your investment return will vary over time. The portfolio could decline significantly shortly after you decide to stay invested instead of paying the debt. The annualized return for your portfolio could stay below the long-term average for a number of years.

Many economists say because paying the debt is risk free, you need to compare the after-tax risk-free rate of return you could earn from treasury bonds or simi-lar investments to the after-tax cost of the debt. When you do that, it usually makes sense to minimize debt.

You can read a full discussion of this approach here: http://crr.bc.edu/briefs/should-you-carry-a-mortgage-into-re-tirement/

The second perspective is the emotion-al or subjective one.

Some people derive a lot of comfort, or psychic income, knowing that they aren’t in debt. Not having debt means fewer mandatory monthly expenses. If income declines or unexpected expenses arise, they have more flexibility than if they were in debt. They also know home equity is available to be tapped in an emergency.

On the other hand, when markets are doing well, some people are comforted by the extra gains earned by having more money in the markets instead of having used it to eliminate debt. It’s also a com-fort to know they always can sell some investments to pay the debt or other expenses.

But it’s a different story when mar-kets decline. A bear market can be less unnerving when you have fewer assets in the market to lose value and know you aren’t encumbered by debt.

Consider these different scenarios and decide where you are on the emotional scale. Then, balance the mathematical and emotional perspectives to decide on the amount of debt you want to carry in retirement.

Investment Recommendations and PorfoliosJune 2018 10

Some Green Lights Are Turning Yellow It is remark-

able how little inflation pres-sure there is when the labor market is this

strong.Inflation is higher than it was a few

years ago and finally is near the Feder-al Reserve’s 2% target on its preferred PCE Index. Yet, price increases are well below where they usually are this late in the economic cycle. Several factors are keeping a lid on inflation.

In a normal cycle, compensation would be increasing at a rapid rate when unemployment is less than 4% and busi-nesses report being unable to fill many job openings. Yet, annual wage growth still is below 3% and rising very slowly.

Other forces working to hold down price increases are technology, interna-tional competition and the overhang from the financial crisis.

Moderate inflation is one reason the Fed doesn’t have to aggressively tighten monetary policy, and that could make this late stage of the economic cycle an extended one.

The strong housing market is anoth-er key support for growth. Demand for homes is increasing and the major deterrent to sales at this point is an

inadequate inventory of homes for sale.Also, businesses are reporting strong

earnings and cash flow, and are invest-ing more in equipment for expansion.

In the first quarter, growth slowed from 2017’s robust rate, but otherwise the economy is showing few signs of adverse effects from tighter monetary policy.

None of this good news has helped stock prices, showing that current growth is only one factor that affects stock prices.

What already is priced into the markets is at least as important as the latest news. Stocks surged following the bottom in 2009 and espe-cially from late 2016 through 2017. It is likely investors anticipated higher economic growth. The earnings growth we’re experiencing now and maybe the rest of the year already could be reflected in stock prices.

Other factors also could be offsetting earnings growth. Higher interest rates make other investments more attractive and cause investors to demand higher expected returns from stocks. Stock prices were able to increase

faster than earnings and gross domestic product (GDP) because interest rates were near zero and were expected to stay there. That’s no longer the case, so investors are recalibrating stock prices.

International stocks, especially emerg-ing markets, generally have held up better than U.S. stocks so far in 2018, though there was a change in trend in late April. The fundamentals outside the United States still are positive. The economies are

Investment Recommendations

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growing. Stocks sell at lower valuations than in the United States, and the growth potential seems better. International stocks usually do well when the United States is in the late phase of its cycle, so the recent choppiness probably is a correction in a bull market.

Aided by strong gains in oil and ener-gy, commodities have been among the global market leaders in recent months. That’s no surprise. Commodities

historically perform very well late in the economic cycle. Their recent gains should continue as long as the global economy is growing. A lot of produc-tion was shut down during the bear market of 2014-2016, and it will take a couple more years for it to come back on line. Until then, or until growth slows, demand should outstrip supply for most commodities.

There are yellow lights I continue to

monitor. The recent U.S. economic data indicated that growth slowed recently from the strong rate of 2017. It is still growing, but I’m watching my key recession early warning indicators. I’m also focused on a recent decline in Eu-rope’s growth data. Again, that economy still is growing but at a slower rate. Of course, I’m watching the inflation data. For now, the late phase of the growth cycle seems likely to continue.

How Balance and Diversification Help in Volatile MarketsWe’ve seen

some changes in the markets and our portfo-lios over the last month. Some of

our lagging investments registered significant price increases, while some investments that were doing well stumbled.

Let’s start with the recent tumble in Price Latin America (PRLAX). The fund is down 7.38% in the last four weeks and now has lost 2.89% for the year to date.

Several events have put investors on edge. Emerging market currencies lost value because of rising interest rates in the United States and an unexpect-ed surge in the dollar. That causes investments denominated in those currencies to lose value and leads some investors to sell.

In addition, Argentina is asking the International Monetary Fund for help to resolve a financial crisis. Argentina is a small part of the fund, but the problem gives pause to investors in the region.

Politics plays a role. The Brazilian Supreme Court ruled that politicians, including the ex-president, could

be prosecuted for corruption. Plus, an economic reform package stalled in the Brazilian Congress. Investors

PORTFOLIO Sector Portfolio

Fund Allocation Ticker 4-Wk Return

Add New Cash?

DoubleLine Floating Rate 24.0% DBFRX 0.23% Yes

Cohen & Steers Realty Shares 10.0% CSRSX 4.77% Yes

Leuthold Core Investment 14.5% LCORX -0.87% Yes

Price Latin America 9.0% PRLAX -7.38% Yes

WCM Focused International Growth 32.5% WCMRX 1.19% Yes

iShares Gold Trust 5.0% IAU -2.47% Yes

iShares Commodities Select Strategy 5.0% COMT 4.37% Yes

*Returns are as of May 11, 2018

Balance and diversification are paying off. Price Latin America took a tumble this month. But it was offset by gains in other positions to keep the portfolio about even for the last four weeks. There are no changes to make this month.

Balanced PortfolioFund Allocation Ticker 4-Wk

ReturnAdd New

Cash?DoubleLine Floating Rate 27.0% DBFRX 0.23% Yes



Price Latin America 8.0% PRLAX -7.38% Yes





There are no changes this month. I'm watching Price Latin America to see if there are early signs the recent decline is more than another correction in the bull market. But gains in other positions offset the decline in PRLAX this month.


would like to see it enacted before October’s elections. The elections also are worrisome, because populist candi-dates currently lead the polls.

That’s a lot for markets to digest in a short time. The Latin American econ-omy should continue to benefit from global growth and higher demand for commodities. It looks like this will be another pause in the bull market that began in 2016, but I’ll be monitoring the situation for signs that a new bear market is beginning.

We finally had good news from Co-hen & Steers Realty Shares (CSRSX), which invests in real estate investment trusts (REITs). We bought the fund in 2017 after a decline in REITs seemed to reach a bottom. But REITs had an-other tough time in early 2018.

Investors might finally be recogniz-ing the value in REITs. The fund is up 4.77% in the last four weeks, though it’s still down 2.96% for the year to date.

There are sectors of the REIT market that are likely to have problems, such as shopping malls and office buildings in areas that are overbuilt or have weak economies. But there also are sectors with strong opportunities and that will do well, as long as the economy grows.

That’s why I like CSRSX. It owns only REITs with high-quality proper-ties and quality management. The fund also purchases only sectors of the REIT market that are reasonably valued and appear poised to benefit from the next phase of the economic cycle. The fund recently owned 44 stocks and had almost 42% of the fund in its 10 largest positions. Top positions recently were UDR, Equinix, Prologis, Digital Realty

Trust and Extra Space Storage. Lead-ing sectors in the fund were offices, apartments, data centers, hotels and health care.

Despite the rising dollar, the global stocks held by WCM Focused Inter-national Growth (WCMRX) continue to do well. The fund rose 1.19% in the last four weeks and is up 3.12% for 2018.

WCMRX looks for companies with sustainable growth. A company must have management that develops a culture of growth. The company also needs to benefit from one or more leading global trends, such as the growth of the middle class, increased use of technology, outsourcing and others. An attractive company also has barriers to competition.

The fund is a concentrated, long-term investor. It recently held 33 stocks and had a turnover rate of only 21%. About 38% of the fund was in the 10 largest positions. Recently, top hold-ings were CSL, Keyence, Accenture, Chubb and Taiwan Semiconductor.

Last month, we replaced Mairs & Power Growth with Leuthold Core Investment (LCORX). The fund lost

0.87% in the last four weeks and is up 0.08% for the year to date.

I like LCORX in this late stage of the economic and investment cycle. It is a tactical asset allocation fund that typically emphasizes U.S. stocks but changes its portfolio with the markets. It uses a range of technical indicators, including some proprietary tools, to decide how to change the allocation.

The fund can invest in U.S. and foreign stocks and bonds, as well as cash. It also can hedge against a stock decline by selling short stocks or ex-change-traded funds (ETFs) or using futures and options.

LCORX substantially reduced its stock exposure during the course of 2018. It was invested 67% in U.S. stocks at the start of the year, and that position was down to a 40% net position by the end of the first quarter. Rising interest rates also caused the fund to reduce its bond exposure to around 20%, which is among its lowest bond allocations since inception. The fund has about 7% in cash and 14.5% in hedging positions.

LCORX doesn’t think a bear mar-ket has begun and will increase its

Income Growth Portfolio Fund Allocation Ticker 4-Wk

Return Add New Cash?

DoubleLine Floating Rate 31.0% DBFRX 0.23% Yes




JPMorgan Alerian MLP ETN 7.0% AMJ 5.80% Yes




This portfolio had a good month thanks to recoveries in Cohen & Steers Realty Shares and JPMorgan Alerian MLP ETN coupled with continued strong returns in iShares Commodities Select Strategy. There are no changes to make this month.


U.S. equity position if its indicators show the stock market is improving. But it believes we’re late in the cycle and the stock position is unlikely to return to 67%.

As usually happens late in the eco-nomic cycle, commodities are doing well. iShares Commodities Select Strategy (COMT) returned 4.37% in the last four weeks and 8.86% so far in 2018.

Much of that return is due to the spurt in energy prices, which always are at least 25% of this fund. But many other commodities also have been rising in price thanks to global growth

and expectations of higher inflation. BlackRock manages this fund using proprietary models that try to capture intermediate and long-term trends in commodities. The fund owns stocks of commodity producers, as well as futures and options contracts based on commodities.

Gold continues to have its ups and downs. Lately, it has been hurt by the rise in the dollar. iShares Gold Trust (IAU) is down 2.47% over the last four weeks but still is up 1.12% for the year to date. We own this fund as a hedge against higher inflation and geopoliti-cal tensions.

We diversify the portfolios with DoubleLine Floating Rate (DB-FRX). You don’t want to own many fixed-rate bonds when interest rates are rising, because the value of the bonds declines. The interest rates on floating-rate debt move up and down with market interest rates, so higher rates aren’t as damaging.

The fund owns primarily bank loans that have been sold to investors. The main risks are that borrowers default, or a liquidity crisis causes prices to decline. Neither seems to be on the horizon.

Floating-rate debt became more popular as interest rates rose, so don’t expect much appreciation in the fund this year. We’re likely to earn only the yield, which currently is 4.83%. The fund is up 0.23% for the last four weeks and 1.57% for the year to date.

RETIREMENT PAYCHECKRecent years have been tough times

for income investors.First, interest rates on conventional

income investments were near zero.

True Diversification PortfolioFund Ticker Alloc. 3 mos. 1-Yr. 3-Yr. 5-Yr. 10-Yr.Total Portfolio 100% -2.73 5.15 4.31 4.20 4.22

Plus or minus S&P 500 3.26 -8.19 -6.23 -8.93 -5.11

Price Capital Appreciation PRWCX 11% -2.80 8.76 8.83 10.78 9.10

Price HY PRHYX 11% -1.15 -0.71 4.32 4.41 7.25

FPA Crescent FPACX 18% -3.93 4.93 5.31 7.18 6.94

PIMCO All Assets All Auth* PAUDX 10% -1.42 6.91 3.10 0.55 4.18

Berwyn Income BERIX 13% -0.81 2.45 2.97 4.42 6.57

Cohen & Steers Realty Sh CSRSX 5% -2.67 -1.02 3.92 5.57 6.44

PIMCO Real Return** PRRDX 5% -0.19 0.38 0.99 -0.42 3.37

Oakmark** OAKMX 5% -7.39 14.57 10.49 13.36 11.18

William Blair Macro Alloc*** WMCNX 12% -0.08 3.64 -1.19 2.45 n/a

Leuthold Core Investment**** LCORX 10% -4.72 9.81 5.70 7.44 4.07

Returns longer than one year are annualized. *Added to the portfolio in February 2012 issue. **Added in the December 2014 issue. ***Added in the September 2015 issue. ****Replaced MainStay Marketfield in the June 2016 issue. Portfolio returns are as of April 30, 2018. Fund returns are as of April 30, 2018. N/A=Not Applicable.

Retirement Paycheck Portfolio

Fund Ticker Allocation12-mo. Yield

Add New Cash?

DoubleLine Floating Rate DBFRX 50.0% 4.83% Yes

iShares Commodities Select Strategy COMT 5.0% 5.14% Yes

IBM IBM 5.0% 4.21% Yes

Verizon VZ 5.0% 4.83% Yes

AT&T T 5.0% 6.13% Yes

DoubleLine Income Solutions DSL 15.0% 8.86% Yes

JPMorgan Alerian MLP ETN AMJ 15.0% 7.21% Yes


There are no changes to make this month. The holdings continue to pump out high yields, and a surge in AMJ helped the bottom line. I'm expecting recoveries in our three high-yield stocks.


Now, rates are rising, and that’s caus-ing prices of income investments to decline.

In our Retirement Paycheck portfo-lio, we avoided many of the problems with these trends by expanding the investment universe to include pre-ferred stock, closed-end funds, div-idend-paying stocks, master limited partnerships, high-yield bonds and more. Plus, we don’t buy and hold. We own investments only when we see a margin of safety and sell when risk seems too high.

It looks like JPMorgan Alerian MLP ETN (AMJ) is bouncing back. This exchange-traded note (ETN) and other master limited partnership (MLP) investments have been in and out of the portfolio over the years. We bought

AMJ again in 2017 when it appeared to be recovering from a bear market. But MLPs had problems late last year and again early this year.

As I reported last month, those problems seem to be fading, and inves-tors might be recognizing that. AMJ returned 5.80% in the last four weeks, though it still is down 2.18% for 2018.

The recent yield is 7.21%.This portfolio also owns three

high-yielding stocks. IBM (IBM) was recovering from its

long bear market after reporting very positive revenue and earnings for the fourth quarter of 2017. But investors didn’t like its first quarter of 2018 earn-ings report in April. The stock dropped

One-Stop Recommended PortfoliosAlternative Funds

RW Recommended Fund NTF Funds* ETFs Fidelity Price Vanguard

DoubleLine Floating RateDoubleLine Floating Rate N

First Trust Senior LoanFloating Rate HI

Floating Rate N/A

Cohen & Steers Realty Shares

Cohen & Steers Realty Shares

iShares C&S REIT Real Estate Inv Real Estate REIT Index

Leuthold Core InvestmentLeuthold Core Investment

N/A N/A N/A N/A

Price Latin America Price Latin America iShares Latin American 40 Latin America Latin AmericaEmerging Markets Stock

WCM Focused Int'l GrowthWCM Focused International Growth

iShares MSCI ACWI Global Equity Europe Europe

JP Morgan Alerian MLP ETN N/A JP Morgan Alerian MLP ETN Select Energy New Era Energy

iShares Gold Trust N/A iShares Gold Trust N/A N/A N/A

iShares Commod. Select Strategy

BlackRock Commodity Strat

iShares Commod. Select Strategy

Commodity Strategy

New Era N/A

IBM, Verizon, AT&T N/A iShares Telecomm (IYZ)Select Telecomm

Media & Telecom

N/A

DoubleLine Income Solutions N/A N/A N/A N/A N/A

*Not all NTF funds listed are available from all the NTF programs. Some are more restrictive than others, and some funds do not want to be available on all the NTF programs.

Simplify your investment life and probably improve returns for concentrating your investments at one or two mutual fund firms or brokers. It will be easier to track and manage your portfolio. The One-Stop Portfolios let you follow our margin-of-safety investment approach at the major fund companies and No Transaction Fee (NTF) broker programs. There is not always a good alternative to one of my recommended funds. Those cases are indicated by "N/A" in the table. In those cases, consider paying a fee to invest in my recommended fund or opening an account directly in that fund.

Portfolio PerformanceSector Balanced Income

GrowthRetirement Paycheck IWW ETFs

One Month -0.47% -0.17% 0.54% 0.45% -2.34%Year to Date 0.10% 0.36% -0.08% -1.51% 7.37%Last 12 Months 8.98% 9.70% 6.68% -0.71% 8.09%3 Years* 6.70% 6.41% 4.55% 4.49% -5.81%5 Years* 4.94% 3.92% 3.04% 4.58% -4.70%10 Years* 3.63% 2.76% 3.48% N/A 2.96%Compound Return 394.91% 352.02% 65.86% 68.47% 70.38%

*Annualized. Returns are as of April 30, 2018. The Income Growth Portfolio was begun in July 2001. The Retirement Paycheck Portfolio began December 2010. The IWW-ETF Portfolio began December 2005. Other portfolios began January 1995.

Our portfolios held their own during a difficult April in the markets. That's the advantage of having balance and diversification. We're looking forward to higher returns in our portfolios as the year goes on.


sharply that day and hasn’t recovered. The stock is down 6.21% for the last four weeks and 4.05% for 2018 so far. But IBM did announce it was increasing its dividend, and the yield now is 4.21%.

I think the latest quarter is merely a pause in IBM’s recovery. The new products and services are delivering higher revenue, and margins are im-proving. The dividend will continue to increase.

AT&T (T) hasn’t received much love from investors lately. It is in litigation over a proposed merger with Time Warner, and its first-quar-ter earnings report was weaker than expected. The stock is down 8.40% in the last four weeks and 14.38% for the year to date. The yield is 6.13%. I expect the stock to do better once the uncertainty regarding the merger is over.

Verizon (VZ) is up 2.19% for the last four weeks but still down 5.91% for the year to date. The yield is 4.83%. Its recent earnings report was positive, and the stock should contin-ue to recover.

DoubleLine Income Solutions (DSL) continues to hold up well at a difficult time for income funds. The fund gained 0.05% for the last four weeks and 3.71% for the year to date. Its yield is 8.86%.

The bad news from my perspective is the discount of the stock price to net asset value shrank to 2.87%. It was around 8% when I first recommended the fund, so we were buying the assets at a substantial discount. As investors have noticed how well-managed the fund is and are flocking to it, the share

price has been rising faster than the underlying assets.

We’ll continue to own this fund, which I consider the best of Double-Line because of its investment flexibil-ity. But I’ll be looking for alternatives with better margins of safety as the discount shrinks.

TRUE DIVERSIFICATIONThe True Diversification portfolio is

performing exactly as expected.Unlike most buy-and-hold port-

folios, this one isn’t closely correlat-ed with the major market indexes. Instead, we own mutual funds that are mostly uncorrelated with the major indexes and with each other. We aren’t dependent on the stock market to deliver returns. We’ll lag the major indexes during a bull market, as has happened since 2009. But we’ll catch up when the stock market has flat and down periods.

We saw that in action in the three months ended April 30. The S&P 500 was down 5.99%. Our portfolio was down only 2.73%. Sometimes the portfolio even appreciates when stock indexes are declining.

Another goal of the portfolio is less volatility. We typically have about half the volatility of the S&P 500. For example, the standard deviation over three years is 5.17 compared to 10.26 for the S&P 500. Over 10 years, our standard deviation is 8.42 compared to the index’s 14.98.

Our low correlation to stocks is reflected in the beta. If our portfolio were perfectly correlated with the S&P 500, the beta would be 1.0. If

there were no correlation, the beta would be 0.0. Our beta to the S&P 500 over three years is 0.47. Over 10 years it is 0.52.

Alpha measures the portfolio’s return earned for the risk taken and compares it to an index. A positive alpha means our risk-return trade off is better than the index’s. Until the Fed began quantitative easing to boost stock prices, we had a higher alpha than the S&P 500. Now, we’re doing a little worse than the index. Over 10 years, our alpha to the S&P 500 is negative 0.82. That will improve the next time stocks weaken.

PIMCO recently changed its mutual fund lineup. It eliminated its “D” share class, which included two of my recommendations: PIMCO All Asset All Authority (PAUDX) and PIMCO Real Return (PRRDX). The remain-ing share classes are too expensive, unless you’re an institutional investor with $1 million or more to invest. So, we’re moving to other funds.

Replace PRRDX with iShares Com-modities Select Strategy (COMT). The purpose of this position is to give us protection against rising inflation and a falling dollar. I think COMT now is the best vehicle for this.

Replace PAUDX with several moves. First, shift two percentage points of its allocation to Leuthold Core Investment (LCORX). Second, put another five percentage points into WCM Focused Internation-al Growth (WCMRX). Third, add the other three percentage points to COMT.


Robert C. Carlson wrote the book on retirement and retirement planning—twice: The New Rules of Retirement (Wiley, 2nd ed. 2016) and Personal Finance after 50 for Dummies (with Eric Tyson; 2nd ed. 2015). He also serves as Chairman of the Board of Trustees of the Fairfax County (Va.) Employees’ Retirement System (a more than $3.0 billion portfolio) and served on the Board of Trustees of the Virginia Retirement System (a $42 billion portfolio in 2005) from 2000-2005. He was educated at the University of Virginia School of Law and McIntire School of Commerce (M.S.) and Clemson University.

Challenges Investors Face: The TJT Solution to Portfolio Management Many investors need help with their portfolios. We saw that with the strong registration and turnout for the webinar featuring Bob Carlson and TJT Capital, “Challenges Investors Face: How TJT Capital Manages Portfolios to Participate in Bull Markets and Protect Capital in Bear Markets.” The webinar is available for replay at www.tjtcapital.com. If you like Bob Carlson’s margin of safety approach and methods of selecting mutual funds, log in or contact TJT Capital at 877-282-4609 or [email protected].

INVEST WITH THE WINNERSThis portfolio’s been invested in iS-

hares Latin American 40 (ILF). The portfolio uses several models to select one ETF with high recent returns that

are likely to be sustained.The recent decline in ILF caused

the models to trigger a change. We’re selling ILF and using the proceeds to buy PowerShares QQQ Trust

(QQQ). The fund tries to track the Nasdaq 100 Index, which is com-posed of 100 of the largest (based on market capitalization) non-financial companies listed on the Nasdaq.

The Aging Excuse“I’m too old

for that.”I hear that

more and more often. It usual-ly disappoints

me. I don’t like to hear that people are giving up on things they enjoy or should be doing simply because they reached a certain age. That’s why I was interested in a recent article in the online edition of Outside maga-zine. It cited research from the Mayo Clinic that found people from 65 to 80 years old significantly im-proved their strength and physical condition after 12 weeks of limited high-intensity aerobic interval train-ing (HIIT).

“HIIT appears to be an effective recommendation to improve cardio metabolic health …in aging adults,” the study’s authors concluded.

We do have to accept some limits

as we age. For example, muscles aren’t as flexible as they used to be, and some people’s joints aren’t what they once were. But most of us don’t have to accept a steep decline in our strength and mobility, along with an accompanying reduction in activ-ities. We can keep our minds and bodies active.

We’ve learned the same thing from the markets the last few years as some people warned about “the aging bull market.” That’s another example of conventional wisdom and consensus thinking that doesn’t stand up to analysis and data. Bull markets don’t end simply because they’ve reached a certain age.

That brings this month’s discussion to a close. I’ll be back next month to share the latest news and research from the Federal Reserve, Congress, the Internal Revenue Service (IRS), the markets and more.

Sincerely,

P.S. I’ll be doing a semi-annual re-view of the economy and markets in the June edition of my new Spotlight Series of online seminars. Because many Retirement Watch readers benefit from this series each month, you’ll want to join these monthly webinars that you can enjoy from the comfort of your home or office when-ever you choose. To learn more about the Spotlight Series, go to the top of the RetirementWatch.com home page, and select the Spotlight link.

Introducing…

Retirement Watch Spotlight:A New Way to Maximize

Your Retirement Nest Egg

Welcome to Retirement Watch Spotlight.

Each month in this new webinar series, I’ll discuss the most important retirement

topic of the day, and give you all the actionable takeaways you need to take

advantage.

Whether it’s making sure you’re out in front of big directional swings in the market…

or positioning your wealth to stay ahead of fast-changing tax laws… or even locking

down your estate to make sure your heirs get everything they deserve…

Each month you’ll come away knowing exactly what to do to make the most of your

retirement.

Here’s a look at my first Spotlight webinar, in which I reveal in detail how to protect

yourself if the market experiences a sudden correction…

Click on the arrow below to listen (make sure your speakers are turned up):

Supplement to Retirement Watch Newsletter

Here’s what you’ll take away from my first Spotlight Seminar:

Tax law changes and exactly how it will affect you, including IRAand estate law changes, individual deductions, and more. You’ll walkaway prepared.

The two most important indicators I use to tell the differencebetween a true bear market and a temporary hiccup (both arepowerful early-warning indicators of recessions).

My recommended portfolio mix for bear protection, including theonly 4 places to have your money invested to duck it’s bite.

The 5 steps every investor should take now to bear-proof yourestate, your portfolio, and your financial future BEFORE thedownturn.

https://www.retirementwatch.com/offer/spotlight-series/?source=RW0618&step=2

Remember, extended market booms tend to end in bangs, not whimpers.

It’s absolutely critical that you set your strategy for the coming bear market now…

before it’s too late.

What You Can Expect from Installment #2 of my SpotlightSeries:

Long-term Care Expenses: It’s the biggest retirement fear of most Americans, and it

makes or breaks most retirement plans.

In fact, not only is the most common mistake NOT providing for long-term care in

their retirement plans…

But of those who DO, many pay a whopping 100% more than they should for long-

term care insurance!

In Spotlight Seminar #2, I’ll show you:

Exactly how to keep long-term care expenses from depleting yournest egg or taking your legacy from your family.

Alternatives to traditional long-term care insurance (I provide youwith specific examples, and show you how to determine which policyis likely to best match your goals and budget.)

How to avoid the mistakes and misunderstandings that sink manypeople, including the single easy way you can avoid that expensivemistake.

How to realistically estimate both the probability you’ll need long-term care, and how much it is likely to cost.

How much of your costs might be paid by Medicare and Medicaid,and why you might not want to rely on those programs.

How to develop a plan for dealing with any long-term care expensesthat may come your way.

As you can see, there’s a lot to cover. That’s why I developed my Spotlight Series in

the first place.

And, frankly, you can’t put a price on good retirement advice. But my subscribers tell

me otherwise:

“As a Wharton graduate, money manager, Chief Financial Officer, and Certified

Financial Analyst, I didn’t think I needed help in making investment choices and

planning for my retirement. I was wrong. I trust Bob Carlson completely and follow

his investment, tax, and planning advice personally.” — Sandy K.

“[Your] suggestion struck a chord… and that represents a potential $100,000 in

avoided estate taxes at the 40% rate. Thanks for the clear and concise estate and

retirement information. Again, my heirs and I have greatly benefited from your vast

well of knowledge.” — Warren W., San Jose, CA

“I lost a lot of money by not paying attention to Bob [Carlson]. My financial advisor

had me deep in the NASDAQ, so I finally fired him. I’m now paying much more

attention.” — John G., Annapolis, MD

Bottom line: The faster you join Retirement Watch Spotlight, the faster you can reap

the money-saving (and money-making) benefits.

To get started — with immediate access to my Spotlight webinars — simply click the

red button below.

I look forward to helping you maximize your retirement.

Sincerely,

Bob Carlson

https://www.retirementwatch.com/landing-pages/spotlight/?step=2

https://www.retirementwatch.com/offer/spotlight-series/?source=RW0618&step=2

vol. 29, issue 6 june 2018 retirement watchbob carlson’s

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