Word: stocke
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Dates: during 1990-1999
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Once you're retired, consider taking your employer's stock out of your 401(k) plan--not as cash but "in kind," physically getting the shares. It can lower your tax bill dramatically, and for anyone with a low cost basis, "it's definitely a go," says BankBoston 401(k) expert Marvin Rotenberg...
Company shares worth hundreds of thousands of dollars in your plan may have cost only tens of thousands to buy. When you take a cash distribution, the stock is sold at market value, and you pay ordinary income tax on the full distribution. But when you take stock, not money, you pay ordinary income tax only on the cost basis, then capital-gains tax on the appreciated value when you sell. In many cases the capital-gains rate is half the combined federal, state and local income-tax rate. The strategy also lowers your 401(k) balance, which lowers your...
...rule on saving for retirement was that you should gradually reduce the percentage of stocks in your portfolio and increase the percentage of bonds. In fact, a common recommendation still used by some planners is to match your percentage of bonds to your age: at your 65th birthday hold 65% bonds (or bonds and cash) and 35% stocks. But a typical bond, the five-year Treasury, historically yields only about 5.3% and yields even less today--about 4.5%. The broad stock market, in contrast, has returned an annual average of about 11% a year since 1926, 18% a year since...
...much more is the question. And how can you handle their higher risk and volatility? Consider this: only seven times since 1926 has the stock market failed to rise for five years or more. The most recent five-year trough came from...
...trick, then, is to keep enough money in the safest high-grade bonds (and in cash) so that you can live off that money--along with your Social Security and pension--during any five-year downdraft in the stock market. That way you're unlikely to be forced to sell your stocks when their price is down. Any money you won't need for at least five years should be invested in a diversified portfolio of stocks or actively managed stock mutual funds...