First Quarter Financial Performance

April 3, 2010 by  
Filed under Investing

I try to take a more detailed look at our overall financial picture and investment performance at the end of each quarter.

This includes confirming that all investment transactions have been accurately entered into Quicken, including reinvested dividends, stock splits, 401(k) transactions, and HSA contributions. (We use our HSA account as a tax-free retirement investment account.)

Periodically, I also update the value of depreciating assets (cars, boats) and our home property values using various online resources. I did this today because I had both the time and curiosity.

Overall, our net worth increased 1.0% in the first quarter. Improvements in our cash positions and positive investment returns were offset by negative changes in other assets. Compared to March 31, 2009, our net worth has increased 19.4%, which I am happy about.

Our internal rate of return for all of our investments was +10.7% in the first quarter and +28.9% for the past 12 months. Although these numbers trail the performance of the Dow, for example, that is understandable because our relative equity allocation is slowly declining. Risk management (particularly inflation) is at the top of our investment agenda.

I think the second quarter of 2010 will be very good on the investment side as I expect more good economic news to boost the spirits and optimism of nervous investors.

Unless something radically changes, I have decided not to convert our IRAs to Roth IRAs. There are two related reasons for this. First and foremost, I still believe that when we will be drawing income from our IRAs, our effective income tax rate will be lower than it is now. Second, the risk that I am wrong about this prediction is relatively low, because our IRAs are non-deductible anyway, i.e., we’ve already paid taxes on the money going in.

I’ve also decided not to make 2009 contributions to our IRAs. I’m going to use that money to purchase more I-Bonds. We get the same tax deferral on the income with the bonus of inflation protection and no required minimum distributions when we age. Sure, we give up the possibility of significant capital appreciation from market investing but at this point in our investment lives, I’m all about risk management.

So how did things go for you in the first quarter?

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4 Responses to “First Quarter Financial Performance”
  1. Dangerman says:

    “…I’m going to use that money to purchase more I-Bonds”

    Can’t you do both by buying I-Bonds inside an IRA? If nothing else, a self-directed one should let you do just that. Advantages would include more flexibility over the withdrawal timing, while also getting the tax advantage.

  2. MasterPo says:

    TML – On what basis do you say that your post-retirement tax rate will be less than what you’re at now?

    Given that most people need just as much income after retirement as they do before they retire (the spending patterns may be different but the amount is the same), why do you think your tax rate will be lower?

    (and that’s not to mention the political climate either…)

    • MasterPo – I am taxed at the top rate now but I don’t spend anywhere near everything I earn. I expect my taxable retirement income to be much lower than it is now which is how I am planning. So unless Congress ratchets the mid-income tax rates way up (possible but unlikely), I should be taxed at lower rates in retirement.

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