Yields declined sharply in 2020 as the Federal Reserve lowered interest rates in response to the pandemic. Though interest rates have jumped recently, in December 2020 the 10-year Treasury bond yield was stuck below 1%.
For total-return-minded retirees using a bucket strategy, however, watching already-meager interest rates head down even further is a nonevent. That s because trimming appreciated holdings, especially stocks, can provide cash flows for bucket investors even as income distributions slow to a trickle. In off years for rebalancing, a cash bucket can serve as a buffer, providing cash flows and staving off the need to withdraw from assets when they re down.
Editor s note: A version of this article was originally published on March 28, 2019. It is part of Morningstar s Tax and IRA Guide special report.
As of today, you have a little more than a month and a half to contribute to an IRA for the 2020 tax year.
Of course, the heaviest lift in funding an IRA is finding the money to invest: While your 401(k) contributions likely go into your account on autopilot, most of us don’t have an extra $6,000 or $7,000 (the 2020 IRA contribution limits for savers under/over 50, respectively) lying around. It’s no wonder so many people rush in their contributions at the last possible minute, just before their tax-filing deadlines. (Bear in mind that you can make smaller contributions than the full contribution amount.)