Age 70 1/2–What’s Up With That?

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We have noticed that the rules about IRA account withdrawals cause some confusion, particularly among those who are approaching age 70. This article will cover the basics for most people. It is not intended to be advice or a recommendation for your specific situation.

For traditional or rollover IRA account owners, withdrawals after age 59 ½ are free of penalty but income taxes must be paid on the amounts withdrawn. One may withdraw money or not, in accordance with their needs and plans. Beginning at age 70 ½, the rules change a little.

For each year beginning with the year you turn 70 ½, a “Required Minimum Distribution” (RMD) must be withdrawn. ‘Required’ means there is no option about it, it must be done. ‘Minimum’ means that at least the calculated amount must be withdrawn, but you may withdraw more if you choose. ‘Distribution’ is simply the word the IRS uses for withdrawals.

The way the numbers work, the RMD starts out a little under 4% of the account balance at age 70, then rise gradually each year to a little over 5% at age 80 and close to 10% by age 92. The withdrawals will be taxable—that is the whole object of the exercise. You can see that with those requirements, IRA accounts may still have significant balances until advanced ages.

Here are just a few fine points:

  • The calculation begins with the prior year-end balance.
  • The factor used comes from an IRS table, and we will do the arithmetic for you.
  • The withdrawal may be made any time in the calendar year.
  • The first time only, you may delay until April 1st of the following year—but if you do, you will also need to withdraw for the second year in the same year—so income will be bunched up.
  • If you have multiple IRA accounts, you may take the RMDs from whichever accounts you prefer, as long as the total requirement is met.

Our object for each client is to have money do what people need it to do. So the question of how you should manage your accounts and your withdrawal strategy is best answered in a one-on-one discussion. If you would like our help, please call or email us. The IRS publication about RMDs is available online here

Different rules apply to inherited IRAs, Roth IRAs, and certain other situations. Check with your advisor about your situation.

What’s Next?

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Fifty years ago, comic strip hero Dick Tracy’s famous 2-way wrist radio got upgraded to a 2-way wrist TV. Forty years ago, visionaries were talking about telephones that would fit in a shirt pocket. Instead of each home having a phone number, each person would have one. In between those dates, the country’s only telephone company introduced push-button “dialing” as an alternative to the rotary dial.

You all know the rest of the story. In many respects, what seemed like science fiction or fantasy in decades past has become a routine part of everyday modern life. The same is true in many aspects of our lives.

There are constants in life, of course. We each seek to make a difference, to be happy, to provide for ourselves and others, to smile and be smiled at, to connect with our fellow human beings. Many of our most fundamental impulses remain unchanged since the dawn of time.

So the conditions of our world are a mix of unchanging things like human nature and the sun rising in the East, and rapid change in other things. All the way back in 1970, futurist Alvin Toffler wrote about “Future Shock,” a perception of too much change in too short a period of time. If anything, the pace of change has accelerated since then.

In life, we suspect that being grounded in the enduring truths help equip us to adapt to change.

In the field of investing, we believe that understanding the unchanging aspects of human nature help us understand and deal with change. The ever-evolving landscapes of the economy, markets, companies, and technology produce constant and unpredictable changes. But no matter how different the world may seem, new changes will still produce reactions and over-reactions, fads and manias, and varying amounts of fear and greed.

We will admit it. We are entranced with the conflict between simple eternal principles and the endless complexity of the world. Making sense of it to help people in their real lives—that’s why we wake up and get to work every day. If you would like to talk to us about your situation, write or email us.

Peril or Opportunity?

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Everybody talks about “the market” but each company in the market has its own story. We need to revisit this to understand the errors we perceive in a currently popular theory.

Some say that actions by the Federal Reserve and other central banks have artificially pumped up asset prices across the board, so there is no safe place to invest. When we look at the pieces of the market, however, a different story emerges.

Some sectors are far below their peak prices from many years ago. Many oil and natural resource companies are trading at only one-third to two-thirds of past high points. The financial sector has actually lost money over the decade ending July 31st.1

Within these and other sectors, we see opportunities. So we reject the idea that everything is too high to own.

At the same time, we know that there are distortions and potential bubbles in some parts of the investment universe. Even though we know the Federal Reserve will eventually get it right (because the markets force it to), we’ve described why we do not like current policy. We have also talked about the potential bubble we see in the bond market, and what might burst it.

Bottom line, the investment universe has rarely been this interesting. It contains both opportunity and peril, the potential for growth and stagnation. As always, we are studying hard to understand the pieces we should own. Please call or email if you would like to discuss your situation.

1As defined by Standard & Poor’s and calculated by State Street Global Advisors


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Happy Anniversary!

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Leibman Financial Services (LFS) was born in August, 1996. It was the culmination of nearly twenty years of prior experience in virtually every aspect of financial services. August 2016 marks the 20th Anniversary of our founding.

While the twenty years before LFS covered a wide range of insurance and banking and investment and benefit products, LFS was intended to focus very tightly on helping people manage their money to get where they wanted to go. This is why we are in business.

And what an incredible twenty years it has been!

  • We were fortunate to be aligned with the independent broker-dealer LPL Financial. LPL provides the platform, resources, and expertise we need to provide state-of-the-art services to you.
  • We were fortunate to land our facilities at 228 Main in beautiful downtown Louisville. It’s a great place to do business.
  • Most of all, we were fortunate to be able to serve so many wonderful people. We are privileged to help with many of life’s most important topics.

A milestone is a natural place to look back and look ahead. We are excited about the future, for a number of reasons:

  1. The gap between expectations and reality as it unfolds is where investment opportunity lives—and we believe the gap is historically wide right now.
  2. We have the largest and most capable staff we’ve ever had, to do the work we need to do for you.
  3. Our range of offerings is expanding to better pursue the diverse needs and circumstances of our clients.
  4. Our communications program expanded dramatically over the past year, with a complete library of our philosophy and methods at 228Main.com and daily commentary in three ‘New Media’ venues.
  5. The founder is intent on working to age 92, and feels better than ever about being able to do so.

A heartfelt ‘Thank You’ to everyone. We are looking forward to the years and decades ahead.

The Next Recession is Coming, Continued

Federal Reserve Bank of St Louis
Federal Reserve of St. Louis

Once again it is time for our quarterly assessment of economic conditions. Is the economy growing or shrinking? This is the fundamental question.

The next recession is always out there, of course, as is the recovery which will follow it. The excesses that build up in good times lead to imbalances that get corrected by economic downturns. But what are the current indications?

• The Index of Leading Economic Indicators is supposed to point to the direction of the economy in the months ahead. It has remained solidly in positive territory.
• The bond market speaks to us about economic conditions through the yield curve. Although it has flattened somewhat recently, it remains in growth mode.
• The Current Conditions Index from LPL Research remains in positive territory.
• The “Overs,” a proprietary LPL measure of potential over-spending, over-borrowing, and over-confidence, point to continuing expansion.
• Details on the LPL Research work are available here.

Economic news is always mixed, and can always be better. But jobs and incomes and spending continue to grow in fits and starts. The weight of the evidence says we are doing OK, at least.

We do have challenges. Policy makers attempt to manage the economy from above, using a philosophy that was discredited long ago. Their interventions create distortions which we monitor carefully. Much of our work involves avoiding the problems created by people trying to “help us.”

We are on the job, doing the best we can to preserve your interests and take advantage of opportunities as they arise. Call or email us if you have questions or comments.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All indices are unmanaged and may not be invested into directly.

Broadening Our Horizons

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For many years, we have specialized in total return investing. If the fruit crop is enough to live on, we haven’t needed to care what the neighbor would pay for the orchard. We have promoted the idea that living with volatility is rewarding. The concept seemed right for the times, since the prevailing low interest rates offer little return on fixed investments.

This traditional core approach hasn’t been right for everyone. Some lack the confidence that we will overcome our challenges, persevere, and continue to grow and thrive. Others just can’t tolerate the ups and downs of long term investing. While our approach is not right for everyone, some of the alternatives are not good either. Consequently, we have come to the realization that we can do a better job for you and others if we offer a range of options.

One client on the verge of retirement has a more pessimistic view of the future than we do. He concluded he ought to put half of his wealth in capital preservation strategies that are likely to hold the money together in case of disaster. And he also concluded that the growth potential of our core approach could be an important hedge against rising cost of living in the years ahead. So he ended up with a 50/50 split based on the idea that he might be right, or we might be right—and the best course was some of each instead of all of one or all of the other.

A retired couple has been comfortable with our approach, but felt that 20% in more stable strategies would offer some preservation against unexpected major health problems.

Others understand and like our traditional approach, and have no desire to change a thing. The key is, each person may make their own decision about the tradeoff between stability and growth.

So we will be bringing our values and principles to a wider range of options. We’ll be at home with a range of viewpoints and investment objectives. On the capital preservation side, we will bring our research strengths to attempt to avoid the major sources of risk and to find opportunity where we can.

That old “buy low, sell high” thing continues to influence our thinking. We won’t be interested in helping people sell out at the wrong time by getting more conservative at low points. Nor will we want to see people getting enthusiastic and more aggressive at market high points. The new structure of offerings is intended to help people find the portfolio they can live with in all market conditions—and be able to do that in our shop if they choose.

As always, if you have questions or concerns or would like an expanded discussion about your circumstances, please email or call.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

You Can Rig the System, Too

© www.canstockphoto.com / AlexMax

Politicians are telling us that we would be doing better if the system was fair. “The system is rigged” is a bipartisan theme this season. Through incompetence or malevolence or greed, the powerful few are supposed to be holding us down.

If you know us, you know we don’t spend a lot of time arguing politics. It is no surprise that any human endeavor has room for improvement. More pointedly, there are things about our society that are terribly unfair—including some things that are deeply rooted.

Each of the seven billion of us retain the ability to wake up each day and make the most of what we have to work with. Our resources may be few or many; our challenges may be petty or life-threatening; each one of us has our own story and our own situation. But we can each make the most of what we have to work with, day by day.

In key ways, YOU can rig the system in your favor. This thought was inspired by a list going around the internet, ‘Ten Things That Require Zero Talent.’ We can judge the merits of this list with a simple thought experiment.

Imagine that you are an employer, providing a valuable product or service to the rest of society. Among your employees there are two in particular you are considering for promotion and a good raise. One of them has all ten of these traits, the other has none of them. Here’s the short version of the list:

Being on time; having a good work ethic; putting in the effort, having positive body language; demonstrating energy, attitude and passion; being coachable and prepared.

So as you think about the free items on this list, which employee will you choose to promote? (Please accept our apologies for asking such a silly question with such an obvious answer.) The simple fact is that one employee rigged the system in his favor, and the other did not.

Our point is that each of us has considerable influence on our own destinies. In election season we discuss political and societal issues, we challenge things that need challenging and support things that deserve support. As we do so, let’s remember that our first job is to wake up each day and make the most of what we have to work with.

The Medicine is Worse than the Disease

© Can Stock Photo Inc. / nebari

Monetary authorities took extreme measures during and after the financial crisis. These policies failed in their stated goal. More importantly, they have the potential for much mischief in the portfolios of the unwary in the months and years ahead.

Fed Chairman Ben Bernanke made it clear that the role of zero interest rates and Quantitative Easing was to push money into productive investments (or “risk assets”) that would help the economy grow. Instead, the biggest tidal wave of money ever flooded into supposedly safe assets, like Treasury bonds. Money flows into US stocks disappeared in the crisis, and basically have never come back. Zero interest worked exactly opposite the way it was supposed to. This obvious reality is totally ignored by the central bankers.

Current Federal Reserve Chair Janet Yellen continues to parrot the party line. Progress toward undoing the mistaken crisis policies has been excruciatingly slow. And the potential for damage to safety-seeking investors continues to mount. Similar policies, or worse, are in effect around the world.

Standard & Poor’s recently issued a report stating that corporate debt would grow from a little over $50 trillion now to $75 trillion by 2021, globally. Bonds are the largest single form of corporate debt, which is how investors are affected. This isn’t happening because corporations are investing so much money in new plants and equipment and research. It is merely meeting the demand of safety-seeking investors for places to put money. We think of this as “the safety bubble.” It appears to be the biggest bubble in history.

Standard & Poor’s is warning of future defaults from companies that borrowed too much money at these artificially low interest rates. Our concern is that when interest rates inevitably rise, people locked into low interest investments will see large market value losses even if their bonds are ultimately repaid.

We’ve written about the impact of higher inflation on today’s supposedly safe investments. Now the warning from S&P highlights another risk. The distortions created by counter-productive monetary policy are growing.

Of course, we believe our portfolios are constructed to defend against these risks, and to profit from the artificially low interest rates. We will continue to monitor these and other developments. If you have questions or comments, please email or call us.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

New Media is Bigger Than You Know

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The first birthday of our online communication efforts is upon us. 228main.com was intended to provide us with a means to talk to a lot of clients at once, especially useful in times of stress. There were other objectives as well.

We know that communications influence behavior; behavior influences investment outcomes; and client outcomes are what we are about. The new media lets us highlight each day the thing we find most pertinent or interesting. We can drive home the lessons that help people invest and plan effectively.

If you follow us on Facebook, Twitter or LinkedIn, you know we have created some regular features to help us tell our story. The Junior Staff and Market Haiku show up weekly, along with links to pertinent articles and news.

The most surprising thing we’ve learned about the new media is how useful it has been to people we know, for much broader purposes than business communications. One retiree became acquainted with Twitter to keep up with a grandchild’s college sports team. A sports fan has grown a custom news feed of local print and broadcast sportswriters as well as recruiting clearinghouses, player and team accounts and other knowledgeable fans. A political junkie collects thoughts from candidates, opinion leaders, polling experts and major newspapers. We follow the best minds in the business world. Others pursue news about hobbies or interests.

In other words, Twitter can be a customized information source, tailored by you to your preferences. You choose the sources to follow. Whether or not you register, you can see our daily quick notes and commentary. You do not have to ever post anything in order to use the tool. However, if you do have a message, you can get it out.

LinkedIn, we’ve noticed, is more of a business forum and networking affair. Facebook is popular with many of our clients for many reasons. People see what their children or grandchildren are up to, and keep up with more distant relatives like never before. Facebook also allows businesses to have pages, which is how we can communicate with those who choose to ‘like’ our Facebook page.

Perhaps the biggest misperception among non-users is the idea that the whole world will know what you are up to if you participate. The fact is, you choose what to publish and who to interact with, if anybody. Many people just take in information, and post or publish very little. You might explore these venues to see if they can improve your life. The menu buttons at 228main.com can connect you.

Protection Against Prosperity

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Protectionism has been a rallying cry for many disaffected voters this year. Insurgent campaigns on both the right and the left have been calling for higher import duties and economic incentives for domestic industry. Meanwhile, across the Atlantic, protectionist sentiment was a key driver in the campaign for the United Kingdom to leave the European Union.

Protectionism–the idea that you can improve the economy by taxing foreign imports and subsidizing domestic industry–is a comforting notion. We all want a vibrant economy with thriving local industry. But as is often the case with economic policy, regulatory intervention in the form of tariffs and subsidies can be ineffective or even counterproductive.

Capitalism rests on a simple premise: mutually beneficial exchanges make us all richer. When foreign goods show up at our ports, they’re not accompanied by warships forcing us to take them at gunpoint. We buy imported goods because we perceive a benefit in doing so. If we can buy a $100 foreign-made widget instead of a $200 widget manufactured locally, that leaves us $100 richer.

Protectionists argue that buying these cheap imported goods is short-sighted and self-destructive because it harms domestic industries. To be sure there are winners and losers in this scenario, and cheap foreign competition will hurt domestic widget makers. If we take an even bigger view, though, it becomes difficult to see how it benefits us to prop up inefficient industries at the expense of everyone else. Raising the cost of importing widgets helps out widget manufacturers, but it hurts consumers who have to pay more to buy widgets. Worse, it hurts industries that use a lot of widgets. And worst of all, it actually hurts all U.S. export industries.

Tariffs hurt our exports in two ways: first, and most obviously, other countries are not going to be happy with us, and will eagerly retaliate by levying their own tariffs against us. But beyond that, money that gets sent overseas to pay for imports is not “lost”, as enriching other countries helps create markets for our own exports. We would not be able to sell as many exports to other countries if we weren’t buying their imports as well. Again, commerce makes us both richer.

More subtly, subsidizing industries creates economic inefficiencies through distortion. If the domestic widget industry is failing, ultimately the solution is not to pump money into widget manufacturers to sustain an unsuccessful industry, it’s to reinvest those resources into other industries (such as ones that benefit from having access to cheap foreign widgets.)

To be clear, we realize that there is a lot of real hardship involved in this process. This is true of any economic progress: the horse-drawn carriage industry was devastated by the invention of the automobile, for example, but the solution was not to tax automobiles to save carriage makers’ jobs. Adapting to economic changes may be painful, but the pain is eased by having a vibrant, efficient economy—which we believe is ultimately incompatible with protectionist trade policies.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.