This week's topics: IRA withdrawal rules, how to get started in investing, and career tips in the financial planning field.

Hi Gail,

My wife and I have IRA accounts. Before withdrawal, I total the balances in each account and use the divisor published by the IRS for our ages.

I've read where the amount to be withdrawn must be calculated for each individual account and not from the balance of both accounts. Why are two calculations required?


Dear Theodore,

Every IRA owner must calculate their OWN withdrawals once they reach age 70.

As you may be aware, under the old rules there were at least three different ways to figure your minimum withdrawal. What's more, the amount differed depending upon the method you chose and who your beneficiary was.

Since you could use a different method and have a different beneficiary on each of your IRAs, you had to do a separate calculation for each one.

As you may be aware, in January the Internal Revenue Service proposed new rules which greatly simplify this process. For most IRA owners there is now one method for calculating your minimum required distribution, no matter who your beneficiary is — spouse or non-spouse, older, younger, — you simply divide what your IRA was worth at the end of the previous year by a "life expectancy" factor from a standard table provided by the IRS.

For example, all 75-year olds will divide by 21.8. (You can get a complete list of the "Uniform Distribution Period Table" for IRAs at www.irs.gov.)

The only exception to this rule occurs if your spouse is your beneficiary and he/she is more than ten years younger (Think: "Tony Randall"!). Then you get an even bigger divisor by looking up your "joint" life expectancy each year. (Again, the IRS has a table for this.)

Dividing your end-of-year IRA balance by a bigger number results in a smaller required withdrawal and, therefore, lower taxes.

While most IRA owners will simply refer to the "uniform distribution" table each year, those who have a much younger spouse will be better off using the second method. If you have different beneficiaries on different IRA accounts, you probably will still have to calculate your distributions separately.

For instance, let's say you're 75 years old and have three IRAs: IRA #1 lists your 64-year old wife as the beneficiary. Value at 12/31/00: $100,000

IRA #2 names with your daughter as the beneficiary. Value 12/31/00: $50,000

IRA #3 names your son as the beneficiary. Value 12/31/00: $40,000

For the two IRAs with a non-spouse beneficiary you have to refer to the Uniform Distribution Table. Look up age 75 and you find out the divisor is 21.8. So this year's required withdrawal from IRA #2 is $2,294; from IRA#3 it's $1,835.

However, because your spouse is the beneficiary of IRA #1 and she is more than ten years younger, your divisor on this IRA becomes 22.4 — the joint life expectancy of a 75 and 64-year old. Required distribution this year: $4,464.

Had you used 21.8 as you did for IRAs #2 & #3, you'd have to withdraw $4,587. So calculating your required distribution separately makes your total withdrawal $8,593 — $123 less than using the same divisor for all three IRAs.

Now here's the really the cool part: the IRS doesn't care which IRA the money comes from. All it cares about is the total. So if your son really ticks you off, you can take this year's entire withdrawal from the IRA that lists him as the beneficiary! If he doesn't get the hint and mend his ways, you can take him off completely and name a new beneficiary.

Believe it or not, this is a whole lot simpler than under the old rules.

Hope this helps!


Dear Gail,

My husband and I are young newlyweds in our early twenties, and we hold good paying jobs. My husband makes around 40k annually and I make around 30k annually.

We've thought of investing in the stock market, but we aren't quite sure about how to get started. We'd like to do long-term investing, but with the way the market has been recently it seems too risky to invest that way.

Our goal is to purchase our own home within 10 years, and we see investing as a way to reach that goal.

Can you please give us some advice or tips on how to get started with investing in the stock market? Please keep in mind that we know very little about investing, can you recommend a website or a "Stock Info for Dummies" kind of book that can teach us the basics? Any help would greatly be appreciated.

Thank you,


Dear EP-

Believe it or not, if you've got a long-term horizon (5+ years), market volatility can be your friend — not your enemy!

I strongly suggest you take advantage of a strategy called "dollar cost averaging." This simply involves investing the same amount of money at regular intervals. Because the amount you're investing remains constant, at those times when prices are down, you end up buying more shares; when prices go up, you buy fewer shares. The more prices move up and down, the better your chances of buying "low." For this strategy to be effective, you must be able to continue your investing during periods of low price levels, so consider your ability to keep those investments going at a steady pace.

As new investors with a 10-year time horizon, you should probably start out by investing in a mutual fund that buys large, big-name companies. Let's say you and your husband decide to invest $600 on the 5th of each month.

This means that regardless what the media or your buddies say, you steadfastly adhere to your investing discipline. Consider this hypothetical example of how price fluctuations can work to your advantage: (For the sake of simplicity, I'm going to ignore costs such as commissions.)

Assume that the first month your mutual fund was selling for $10/share, which means you received 60 shares. On the 5th of the next month, it was $6/share, so you got 100 shares. The third month's price was $12/share, netting you 50 shares and the fourth month you paid $9/share, receiving 66.666 shares. (Mutual fund shares are divided into "thousandths".)

By the fourth purchase date, you've invested a total of $2400 and own 276.666 shares. Although the fund is currently selling for $9/share, you've paid an average price of $8.67/share.

Dollar cost averaging will not protect you from losing money in a down market. What it does do is guarantee you will not invest all your money at either the high or low. In fact, you end up getting an average price somewhere in between these two extremes. More importantly, if you follow this kind of disciplined approach, it takes the worry out of determining the right time to invest. Instead of trying to pick the "best" day, you invest over many days and months, taking advantage of the days the market is "on sale" to accumulate shares.

You could consider using a Roth IRA to save for your first-time home purchase. A special provision in the tax code allows you a once-in-a-lifetime privilege of withdrawing up to $10,000 penalty-free, for this purpose.

However, I'm not crazy about the idea because:

1. you can get into trouble if you don't carefully follow all the rules regarding IRA withdrawals and Roths in particular;

2. you're each limited to $2,000/year;

3. philosophically, I don't like using retirement money for other purposes unless it's an emergency.

Keep in mind that as you get closer to needing this money for a down payment on a home, you should consider shifting your funds into a more stable investment category such as high quality corporate bonds. These historically provide a lower total return than stocks, but usually exhibit less volatility.

Keep the faith!


P.S. While you're saving for your first home, don't neglect the important tax break you get by contributing to your company retirement plan. Figure out a budget that enables the two of you to invest for both!


I really enjoy reading your updates on the Fox News Network.

I am currently a financial manager in the health care industry. However, I am considering making a career change and becoming a Certified Financial Planner. 

What do you feel are the opportunities in the financial planning field in the next fifteen years or so?


Dear Jim-

I think the opportunities in the financial planning field are terrific.

However, you're not the only person who has realized that 78 million baby boomers will probably need help managing their retirement nest eggs. Competition is already fierce. Mergers and buyouts are changing the industry rapidly. So you've got to pick the right company to go with.

And you need to think long and hard about whether you can afford to live on a much lower income for several years until your practice gets going. Visit to the website for the Financial Planning Association for some additional insight (www.fpanet.org). While I'm always leery of "averages," when it comes to income, the average financial planner probably makes a lot less than you imagine.

Happy career —


If you have a question for Gail Buckner and the Your $ Matters column, send them to moneymatters@foxnews.com along with your name and phone number.

The views expressed in this article are those of Ms. Buckner or the individual commentator, and do not necessarily reflect the views of Putnam Investments Inc. or any of its affiliates. You should consult your own financial adviser for advice regarding your particular financial circumstances. This article is for information only and is not an offer of the sale of any mutual fund or other investment.