Scott Burns column mug. (Photo: Evans Caglage/Special to the Statesman Journal)

Q. Where does the money go when you invest? In other words, if I invest $10,000 in a single stock or mutual fund, just exactly where does every dollar go? —B.M. by email

A. Your money goes to the seller of the security. If you buy 100 shares of company A from an existing shareholder, your purchase is a transfer of cash from you to the selling shareholder. No money goes to the company. If you buy 100 shares of company A as a new issue, the cash will go to the company for investment.

Companies also have secondary issues. In those, an existing shareholder— usually one with very large holdings— will often sell shares in the offering. Again, your cash payment will go to the seller. In all instances there will also be a transaction cost, with some money going to a broker/underwriter.

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

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 IRS.gov 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. The reduction increases as the age difference increases: With a 50-year-old spouse the RMD rate is 2.86 percent. In the amusing case of a 90-year-old with a 40-year-old spouse, their required minimum distribution rate would be only 2.29 percent.

In both cases the distribution rate increases with each passing year.

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 ETF’s? 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). —K. H. Los Angeles, CA

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. Here, for instance, is a link to a 2010 column explaining exactly how to build Couch Potato Building Block portfolios at Fidelity, Schwab and Vanguard:

assetbuilder.com/scott_burns/building_index_fund_portfolios_on_different_platforms.

On the Vanguard platform, Vanguard mutual funds and exchange-traded funds 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 Couch Potato portfolio with Vanguard Total Stock Market ETF (ticker: VTI) and substituting the Vanguard Total Bond Market ETF (ticker: BND) for Vanguard Inflation Protected Securities. And you could turn it into the Margarita portfolio by adding Vanguard FTSE Developed Markets ETF (ticker: VEA).

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. A Couch Potato Margarita 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.

Questions about personal finance and investments may be sent by email to scott@scottburns.com.