Your Turn: What’s on Your Mind?
Reader Question: “I am familiar with the investing strategy called “dollar-cost-averaging.” I have benefited from this strategy while saving for my retirement years. Now that I am retired, I am aware that taking the same dollar amount each month out of a stock-based mutual fund works against me. I have never seen an explicit strategy to avoid this problem that you call “dollar-cost-ravaging.” I’ve turned 70½ and I need to take Required Minimum Distributions (RMDs). Some of my IRA money is in CDs and some is in stocks. What do you suggest?” – Larry
David’s Response: You understand very well this issue that I addressed in a previous column (archived here). I am pleased to say that there are solutions to avoid the adverse consequences of “dollar-cost-ravaging.” Here is a hypothetical example so we can walk through the strategy:
This approach can work very well in the right situation. And, the size of the IRA doesn’t matter (whether it’s $100,000 or $1,000,000). Of course, more specifics about your individual situation would be needed to determine if this is the best approach for you.
David D. Holland, a CERTIFIED FINANCIAL PLANNER™ practitioner, hosts a weekday radio show at 9AM on AM1380 Ormond Beach, AM1230 New Smyrna Beach and AM1490 Deland. He has also authored two books in his Confessions of a Financial Planner series. Holland offers investment advice through Holland Advisory Services, Inc., a registered investment adviser in Ormond Beach. He can be contacted at (386) 671-7526. Email your financial questions to info@DavidHolland.com.