Jonathan Pond


What’s the Significance of 59½ and 72?

The IRS uses two ages that pertain to withdrawals from any retirement account. While there are some exceptions to the rules, those who are over age 59½ can begin making withdrawals from retirement accounts without penalty while those over age 72 (it used to be age 70½) must begin making at least the required minimum withdrawals from retirement accounts or otherwise suffer a penalty. Those who continue to work after age 72 may be able to wait on making minimum distributions from their workplace plans until they leave the job. But you would still have to make minimum distributions from IRAs. There is no age limit for making regular contributions to traditional or Roth IRAs (if you otherwise qualify) if you’re still employed. Speaking of 59½, there must be a reason, but why they use a half year escapes me. While conforming to these age rules avoids incurring a penalty, you still have to pay income taxes on the withdrawn money except for a proportionate share of any after-tax contributions you made to a traditional IRA (a so-called nondeductible IRA contribution) or after-tax contributions to a workplace retirement plan.

A few workplace retirement plans allow those who are still working for the employer to commence making distributions beyond age 72. Check with your employer.

Smart Money Tips

  • Nowhere to hide of late. Investors are having to endure some conditions which cause more than a little angst but when combined are downright frightening. If the adverse performance so far this year doesn’t do a turnabout before the end of the year, this will be the first time in over 50 years that both bonds and stocks will have declined in the same year. This unhappy happenstance has only arisen thrice in the past nearly 100 years. At least any cash that you hold (money market funds, CDs, etc.) doesn’t lose money. But since cash is paying interest ranging from nil to scant, there’s little satisfaction to be derived here, particularly since inflation will mean investments in cash are losing ground to rising living costs. But at least that’s better than having lost principal with stocks and bonds.
  • Seniors: for whom are you investing? As much as I like to encourage retirees to figure out a way to spend all their money, that’s easier said than done. Some retirees are blessed with more money than they’ll likely ever need. Whether your means are modest or immodest, you may have some money that will probably be passed on to younger generation family members. If so, be sure you’re investing that portion of your portfolio as if it were owned by the child, grandchild, niece, nephew, or whomever. Remember that age influences the way you diversify your investments, so the way you invest money you think you’re going to need is different from the way you should invest money intended for someone who is decades younger than you.

If you find you’ve been investing that money too conservatively, consider changing your holdings somewhat to place more emphasis on capital appreciation. You’ll be doing your heirs a big favor by investing money you don’t expect to need to emphasize long-term growth since (sorry to bring this up) their investment horizon is considerably longer than yours.

Food for Thought

There are two things that are infinite: the universe and human stupidity and I am not sure about the universe. 

Attributed, probably incorrectly, to Albert Einstein although the notion that human stupidity is unlimited has a long history. The number of people who have “invested” all their money in Cryptocurrency is a contemporary example.

Money Can Be Funny

Following up on this week’s theme of rampant stupidity:

Ever wonder about those people who spend $2 apiece on those little bottles of Evian water? Try spelling Evian backward.
      -George Carlin

Word of the Week

ambsace (AYM-zays); also amesace – The double ace, the lowest throw of the dice; the smallest amount of anything; bad luck.

Origin:  from Latin ambas (both) + as (aces).

O noble, prudent folk in happier case!
Your dice-box doth not tumble out ambsace.

-Geoffrey Chaucer; The Canterbury Tales; 1387