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Q: I follow your low-cost investment advice.

I will start a new portfolio as a result of a 401(k)-to-IRA rollover conversion.

My question is: Do I have to open an account at a place like Vanguard to get the benefits of low-cost index funds and ETFs?

This week, save 90% on digital access.

It seems that I can pretty much achieve the same goal at other places, like Fidelity, with an all-ETF portfolio without Vanguard index funds (one has to pay a transaction fee for Vanguard index funds at other brokerages).

A: Yes, you can build low-cost index-fund portfolios on any of the major platforms.

And today it can be done virtually commission-free.

On the Vanguard platform, Vanguard mutual funds and exchange-traded funds (ETFs) are all available commission-free.

On the Fidelity platform, you can invest in 65 iShares ETFs commission-free, as well as the handful of Fidelity index funds.

On the TD Ameritrade platform, you have a choice of 100 commission-free ETFs, including some from Vanguard.

For example, you could build a commission-free portfolio with Vanguard Total Stock Market ETF (ticker: VTI) and substitute the Vanguard Total Bond Market ETF (ticker: BND) for Vanguard Inflation-Protected Securities.

On the Schwab platform, you have a choice of 100 commission-free ETFs, including their own.

And if you stick to the big, basic asset classes, you’ll be able to invest at a total cost of about 0.10 percent.

Such a portfolio at Schwab, for instance, would cost .04 percent for the Schwab U.S. Broad Market ETF (ticker: SCHB), .07 percent for the Schwab U.S. TIPS ETF (ticker: SCHP) and 0.08 percent for the Schwab International Equity ETF (ticker: SCHF), for an average annual cost of 0.063 percent.

Without commissions, it will be possible for anyone to build a nicely diversified IRA account.

Q: My wife is 12 years younger than me. I think I read somewhere that if that were the case, the required minimum distribution (RMD) would be reduced. Is that true? And what would the rate of withdrawal be?

A: That is true. There are two IRS tables that dictate the size of RMDs. One is for the majority of couples who are within 10 years of each other in age, the Uniform Lifetime Table.

The other, called the Joint Life and Last Survivor Expectancy Table, is for couples with an age difference of 10 years or more. Both tables can be found on the website.

At a 10-year age difference, the distribution rate is about the same. The reductions in required minimum distributions start increasing rapidly as the age difference exceeds 10 years.

For most couples, the required minimum distribution rate is 3.65 percent at age 70.

But if a 70-year-old has a 58-year-old spouse (12 years younger), the RMD is 3.47 percent.


Copyright 2014, Universal Press Syndicate

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