RMD

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Griswold
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RMD

Post by Griswold »

I will have to take my first RMD in 2023. Since bonds and CD returns are so abysmal, I was looking for other investments to hold my RMDs for the next 3-5 years just in case the market tanks. I am planning to calculate my RMDs and put that money in a High Dividend ETF and a value ETF. I was also looking for a REIT fund that would not be affected by a downturn in the market. I have read that since REITs have gotten so big, they no longer provide a hedge against a bear market. I would think that there are still some small REITS that would still provide a hedge. I would go out 5 years and then continue to extend it with the thought that regardless of what happens to the market it should recover in 5 years.

I would be interested in how others are planning their RMDs.
sc9182
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Re: RMD

Post by sc9182 »

Griswold wrote: Wed Jan 12, 2022 7:38 pm I will have to take my first RMD in 2023. Since bonds and CD returns are so abysmal, I was looking for other investments to hold my RMDs for the next 3-5 years just in case the market tanks. I am planning to calculate my RMDs and put that money in a High Dividend ETF and a value ETF. I was also looking for a REIT fund that would not be affected by a downturn in the market. I have read that since REITs have gotten so big, they no longer provide a hedge against a bear market. I would think that there are still some small REITS that would still provide a hedge. I would go out 5 years and then continue to extend it with the thought that regardless of what happens to the market it should recover in 5 years.

I would be interested in how others are planning their RMDs.
You are confusing portfolio Invesment/asset-allocation Vs. RMDs.
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WoodSpinner
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Re: RMD

Post by WoodSpinner »

Griswold,

Do you need the RMD for expenses?

One possible option is to take it, In-Kind rather than Cash.

WoodSpinner
WoodSpinner
dbr
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Re: RMD

Post by dbr »

I don't understand. An RMD is just a required transfer of money, or even assets in kind, from tax deferred to taxable investing. There is no special reason to "put the RMD into something." Actually if your tax deferred account dropped in value by the end of the year before the RMD would be less and would cost you less in taxes. I hope you are not considering the RMD to be some sort of source of income for spending that has been dictated to you somehow. You can spend what you need from your taxable accounts or withdraw more from tax deferred. Otherwise your portfolio is affected by what you withdraw and spend, but that has no relationship to your RMD, the only effect of which is to be taxed and possibly to involve rebalancing your asset allocation by a little bit.
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GerryL
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Re: RMD

Post by GerryL »

Griswold wrote: Wed Jan 12, 2022 7:38 pm I will have to take my first RMD in 2023. Since bonds and CD returns are so abysmal, I was looking for other investments to hold my RMDs for the next 3-5 years just in case the market tanks. I am planning to calculate my RMDs and put that money in a High Dividend ETF and a value ETF. I was also looking for a REIT fund that would not be affected by a downturn in the market. I have read that since REITs have gotten so big, they no longer provide a hedge against a bear market. I would think that there are still some small REITS that would still provide a hedge. I would go out 5 years and then continue to extend it with the thought that regardless of what happens to the market it should recover in 5 years.

I would be interested in how others are planning their RMDs.
Sounds like you are trying to pre-bucket your estimated RMDs. I've never heard of anyone approaching RMDs this way. I'm in my 4th year of RMDs. I just figure it out a year at a time. As Yogi Berra supposedly said, “It's tough to make predictions, especially about the future.”

In the past 3 years, my account balance moved up early in the year, so I sold shares of stock and bond funds in a way that would help rebalance and moved the dollars into the IRA cash account. Then I took QCDs and distributions out of cash. Not sure yet how I will proceed this year. Maybe I will move the RMD to cash in a few large chunks throughout the year.

As others have noted, you could always move your RMD into a taxable account in-kind so you wouldn't have to sell after a decline -- unless you need the $$$ for living expenses.
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tennisplyr
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Re: RMD

Post by tennisplyr »

I just take mine when I need the withdrawal, typically from an asset that’s run up recently or out of balance…not very sophisticated.
“Those who move forward with a happy spirit will find that things always work out.” -Retired 13 years 😀
VanGar+Goyle
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Re: RMD

Post by VanGar+Goyle »

It may depend on what kind of RMD account it is coming from.
If it is traditional IRA, I would take it basically from a cash fund.
This avoids market fluctuation/market timing, even with the income tax hit.

If it is a Roth account, then take the RMD from stock fund ( assuming that Roth asset location is Stock ),
and you can reinvest all of it in similar or better stock fund.
If you need to spend the RMD immediately, then it is more complicated,
with re-balancing and bucket strategies.
GaryA505
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Re: RMD

Post by GaryA505 »

My RMDs start next year. My plan is simple. It will be taken proportionally from all of my IRA assets. If I plan to spend it as I withdraw it, I'll take it monthly. If I don't need to spend it, I'll wait until December to take it, then reinvest it in my taxable account. I don't see a need to make it any more complicated than that.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
delamer
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Re: RMD

Post by delamer »

WoodSpinner wrote: Wed Jan 12, 2022 7:48 pm Griswold,

Do you need the RMD for expenses?

One possible option is to take it, In-Kind rather than Cash.

WoodSpinner
This is the key question, and a good strategy if you don’t need to spend them.

If you are spending them, then using them to rebalance your portfolio — as suggested above — is a good idea.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Swimmer
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Re: RMD

Post by Swimmer »

delamer wrote: Thu Jan 13, 2022 3:30 pm
WoodSpinner wrote: Wed Jan 12, 2022 7:48 pm Griswold,

Do you need the RMD for expenses?

One possible option is to take it, In-Kind rather than Cash.

WoodSpinner
This is the key question, and a good strategy if you don’t need to spend them.

If you are spending them, then using them to rebalance your portfolio — as suggested above — is a good idea.

This is why I love this board! I never thought of taking RMD in kind. If I do this, can I withhold a portion for Federal tax?
balbrec2
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Re: RMD

Post by balbrec2 »

VanGar+Goyle wrote: Thu Jan 13, 2022 2:12 pm It may depend on what kind of RMD account it is coming from.
If it is traditional IRA, I would take it basically from a cash fund.
This avoids market fluctuation/market timing, even with the income tax hit.

If it is a Roth account, then take the RMD from stock fund ( assuming that Roth asset location is Stock ),
and you can reinvest all of it in similar or better stock fund.
If you need to spend the RMD immediately, then it is more complicated,
with re-balancing and bucket strategies.
The only way there would be an RMD on a Roth account is if
is an inherited acct. Otherwise no RMD.
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willthrill81
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Re: RMD

Post by willthrill81 »

WoodSpinner wrote: Wed Jan 12, 2022 7:48 pm Griswold,

Do you need the RMD for expenses?

One possible option is to take it, In-Kind rather than Cash.

WoodSpinner
Precisely. An RMD is a tax event, not something that should affect one's AA at all.
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jebmke
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Re: RMD

Post by jebmke »

Swimmer wrote: Thu Jan 13, 2022 3:56 pm
delamer wrote: Thu Jan 13, 2022 3:30 pm
WoodSpinner wrote: Wed Jan 12, 2022 7:48 pm Griswold,

Do you need the RMD for expenses?

One possible option is to take it, In-Kind rather than Cash.

WoodSpinner
This is the key question, and a good strategy if you don’t need to spend them.

If you are spending them, then using them to rebalance your portfolio — as suggested above — is a good idea.

This is why I love this board! I never thought of taking RMD in kind. If I do this, can I withhold a portion for Federal tax?
You can also sell an amount a few days before the RMD hits and then use the net proceeds (after WH) to buy the same asset on the other side in a taxable account. You may find that the asset you want in taxable isn't the same as the one you held in the IRA.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
retire2022
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Re: RMD

Post by retire2022 »

balbrec2 wrote: Thu Jan 13, 2022 3:59 pm
VanGar+Goyle wrote: Thu Jan 13, 2022 2:12 pm It may depend on what kind of RMD account it is coming from.
If it is traditional IRA, I would take it basically from a cash fund.
This avoids market fluctuation/market timing, even with the income tax hit.

If it is a Roth account, then take the RMD from stock fund ( assuming that Roth asset location is Stock ),
and you can reinvest all of it in similar or better stock fund.
If you need to spend the RMD immediately, then it is more complicated,
with re-balancing and bucket strategies.
The only way there would be an RMD on a Roth account is if
is an inherited acct. Otherwise no RMD.
There is RMD in Designated Roth 457 account, I am assuming VanGar is referring to that?

My Roth 457 is currently sitting in a separate Roth IRA and no RMD is required.
Swimmer
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Re: RMD

Post by Swimmer »

jebmke wrote: Thu Jan 13, 2022 4:05 pm
Swimmer wrote: Thu Jan 13, 2022 3:56 pm
delamer wrote: Thu Jan 13, 2022 3:30 pm
WoodSpinner wrote: Wed Jan 12, 2022 7:48 pm Griswold,

Do you need the RMD for expenses?

One possible option is to take it, In-Kind rather than Cash.

WoodSpinner
This is the key question, and a good strategy if you don’t need to spend them.

If you are spending them, then using them to rebalance your portfolio — as suggested above — is a good idea.

This is why I love this board! I never thought of taking RMD in kind. If I do this, can I withhold a portion for Federal tax?
You can also sell an amount a few days before the RMD hits and then use the net proceeds (after WH) to buy the same asset on the other side in a taxable account. You may find that the asset you want in taxable isn't the same as the one you held in the IRA.

Sorry. I don’t understand. Why sell a few days before the RMD hits? I’m new to this.
jebmke
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Re: RMD

Post by jebmke »

Swimmer wrote: Thu Jan 13, 2022 4:38 pm
jebmke wrote: Thu Jan 13, 2022 4:05 pm
Swimmer wrote: Thu Jan 13, 2022 3:56 pm
delamer wrote: Thu Jan 13, 2022 3:30 pm
WoodSpinner wrote: Wed Jan 12, 2022 7:48 pm Griswold,

Do you need the RMD for expenses?

One possible option is to take it, In-Kind rather than Cash.

WoodSpinner
This is the key question, and a good strategy if you don’t need to spend them.

If you are spending them, then using them to rebalance your portfolio — as suggested above — is a good idea.

This is why I love this board! I never thought of taking RMD in kind. If I do this, can I withhold a portion for Federal tax?
You can also sell an amount a few days before the RMD hits and then use the net proceeds (after WH) to buy the same asset on the other side in a taxable account. You may find that the asset you want in taxable isn't the same as the one you held in the IRA.

Sorry. I don’t understand. Why sell a few days before the RMD hits? I’m new to this.
You don't really need to -- you can simply have them liquidate the asset at the time they need to distribute the amount. They can tell how much is required by the amount of the distribution.

From a tax standpoint, there isn't a strong reason to try to do in-kind for highly liquid assets like ETS and most mutual funds.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
Topic Author
Griswold
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Re: RMD

Post by Griswold »

My intent was to park the RMD somewhere that was less volatile than the stock market. I look at the RMD as being forced to sell and I don't want to be forced to sell when the market is down. However, taking it as in kind and putting it in a taxable account may solve that. I could then wait until the market recovers.
dbr
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Re: RMD

Post by dbr »

Griswold wrote: Thu Jan 13, 2022 9:20 pm My intent was to park the RMD somewhere that was less volatile than the stock market. I look at the RMD as being forced to sell and I don't want to be forced to sell when the market is down. However, taking it as in kind and putting it in a taxable account may solve that. I could then wait until the market recovers.
It isn't forced to sell, but there may be some manipulations to restore the asset allocation once the assets are moved to a different kind of account. That can involve investing the money once you have it and also selling or buying to rebalance anyway. You don't have to take the distribution in kind to even it all out. The awkward part is that it does affect the location of assets between taxable and tax deferred. It is indeed forced to pay taxes though.
delamer
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Re: RMD

Post by delamer »

Swimmer wrote: Thu Jan 13, 2022 3:56 pm
delamer wrote: Thu Jan 13, 2022 3:30 pm
WoodSpinner wrote: Wed Jan 12, 2022 7:48 pm Griswold,

Do you need the RMD for expenses?

One possible option is to take it, In-Kind rather than Cash.

WoodSpinner
This is the key question, and a good strategy if you don’t need to spend them.

If you are spending them, then using them to rebalance your portfolio — as suggested above — is a good idea.

This is why I love this board! I never thought of taking RMD in kind. If I do this, can I withhold a portion for Federal tax?
I don’t quite understand what you mean.

Are you asking if you can split the RMD between cash and in-kind?
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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samsoes
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Re: RMD

Post by samsoes »

I just hope I'm still above grass by the time I'm required to take RMDs in the mid 2030s. :|
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dbr
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Re: RMD

Post by dbr »

samsoes wrote: Fri Jan 14, 2022 9:48 am I just hope I'm still above grass by the time I'm required to take RMDs in the mid 2030s. :|
But isn't that a case of death allows you to escape taxes? But wait, your heirs will get hit with the taxes.

If you invest in a taxable account death really does help you escape some taxes.
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arcticpineapplecorp.
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Re: RMD

Post by arcticpineapplecorp. »

Griswold wrote: Wed Jan 12, 2022 7:38 pm I will have to take my first RMD in 2023. Since bonds and CD returns are so abysmal, I was looking for other investments to hold my RMDs for the next 3-5 years just in case the market tanks. I am planning to calculate my RMDs and put that money in a High Dividend ETF and a value ETF. I was also looking for a REIT fund that would not be affected by a downturn in the market. I have read that since REITs have gotten so big, they no longer provide a hedge against a bear market. I would think that there are still some small REITS that would still provide a hedge. I would go out 5 years and then continue to extend it with the thought that regardless of what happens to the market it should recover in 5 years.

I would be interested in how others are planning their RMDs.
some thoughts:
1. REITS can always be affected by a downturn in the market, regardless of their size. Why? What are REITS? Mutual Fund (or ETF) that owns companies that deal in real estate (development/management, etc). So if the economy is affected by a downturn, what do you think happens to the renters who have been paying the companies owning the real estate? They stop paying if they can't afford to. Evictions increase and so on. I'm not sure how a smaller REIT would be immune from this.

2. REITS (big or small) are to be thought of as stocks, because you're owning companies that deal in real estate. Yes those companies collect rents and pay out 90% of profits in the form of dividends, but you still are owning companies. If companies go out of business, that has an effect on the price of the stock. When REITS are discussed people recommend if you hold that it should be part of your overall stock allocation. Since REITS are your stock allocation, they're not appropriate for holding for 3-5 years. Stocks are for long term, not short to intermediate term.

3. Smaller REITS might not have the characteristics you desire in a REIT fund:
a. liquidity
b. publicly traded
c. low cost
d. diversified (enough companies, enough different types of real estate, etc)
e. not indexed to the REIT benchmark

4. how did you come to determine you want to put your RMDs in high dividend stocks and Value ETF? Is that how the money in your IRA is invested now? If not, why are you changing to that?

Since this money will be in a taxable acct (after you take your RMD, it's no longer tax advantaged) why would you want to create taxable events though receiving high dividends??

5. Looking for "a good hedge" means you put money into bonds and/or TIPS. If you're concerned about a downturn, your high dividend stocks will also decline (and value might too, who knows? they're stocks too). So you want to look at what kinds of losses you can sustain and then set up your allocation to your sleep well at night point:

here's some examples from worst drawdown (-50% during Great Recession):

Image
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Stoic9
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Re: RMD

Post by Stoic9 »

GaryA505 wrote: Thu Jan 13, 2022 2:19 pm My RMDs start next year. My plan is simple. It will be taken proportionally from all of my IRA assets. If I plan to spend it as I withdraw it, I'll take it monthly. If I don't need to spend it, I'll wait until December to take it, then reinvest it in my taxable account. I don't see a need to make it any more complicated than that.
Have you thought of? I don't need my RMD. I plan to take it on 5 Jan (100K), place it in taxable. Then on 5 Dec I'll send IRS a check for 24K (24% tax bracket) out of my cash. If my taxable gains 10% over the year (10K) then I'll feel like I paid the IRS only 14K instead of 24K.
VanGar+Goyle
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Re: RMD ( Rothy Comments )

Post by VanGar+Goyle »

retire2022 wrote: Thu Jan 13, 2022 4:08 pm
balbrec2 wrote: Thu Jan 13, 2022 3:59 pm
VanGar+Goyle wrote: Thu Jan 13, 2022 2:12 pm It may depend on what kind of RMD account it is coming from.
If it is traditional IRA, I would take it basically from a cash fund.
This avoids market fluctuation/market timing, even with the income tax hit.

If it is a Roth account, then take the RMD from stock fund ( assuming that Roth asset location is Stock ),
and you can reinvest all of it in similar or better stock fund.
If you need to spend the RMD immediately, then it is more complicated,
with re-balancing and bucket strategies.
The only way there would be an RMD on a Roth account is if
is an inherited acct. Otherwise no RMD.
There is RMD in Designated Roth 457 account, I am assuming VanGar is referring to that?

My Roth 457 is currently sitting in a separate Roth IRA and no RMD is required.
Thank you for being open minded and considerate.
If you inherited a Roth account years ago before 2020 and the SECURE act, there can be RMDs.
If you have a qualified ROTH account, like a 401(k) or 403(b), there can be RMDs.
The Original Poster did not specify if it was an IRA, ERISA, or other account like a trust.

How would a Roth 457 even fit inside a Roth IRA?
Did you roll over the assets instead? That is often a good idea to do before age 72.
retire2022
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Re: RMD ( Rothy Comments )

Post by retire2022 »

VanGar+Goyle wrote: Fri Jan 14, 2022 1:38 pm
Thank you for being open minded and considerate.
If you inherited a Roth account years ago before 2020 and the SECURE act, there can be RMDs.
If you have a qualified ROTH account, like a 401(k) or 403(b), there can be RMDs.
The Original Poster did not specify if it was an IRA, ERISA, or other account like a trust.

How would a Roth 457 even fit inside a Roth IRA?
Did you roll over the assets instead? That is often a good idea to do before age 72.
  • Hi I am 61, and left my job last August 2021, here is my posting of when I did it, which I rolled over my Roth 457 and Pretax 457:
viewtopic.php?f=1&t=324944
  • For transfers to and from accounts what is allowed is described in IRS link/chart, IRS Publication p590a page 22.
https://www.irs.gov/pub/irs-pdf/p590a.pdf
  • See Investopedia description on confirming Designated Roth 457 has Required Minimum Distribution:
https://www.investopedia.com/roth-ira-o ... an-4770747

"Can You Put a Roth Insider Your 457 Plan?
What if you want the advantages of a Roth-type account inside your 457? Some employers offer a designated Roth option. If this is available, you can make after-tax contributions to your 457 plan that you can withdraw later, tax-free. Unlike a Roth IRA, however, your designated Roth account will be subject to required minimum distributions, so a separate Roth IRA could still be a better choice.9"[/i]
  • For additional information IRS describes the RMD requirements:
Required Minimum Distribution outline IRS Publication 590b see pages 7-9 https://www.irs.gov/pub/irs-pdf/p590b.pdf
Last edited by retire2022 on Fri Jan 14, 2022 4:04 pm, edited 2 times in total.
retire2022
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Re: RMD

Post by retire2022 »

Griswold wrote: Wed Jan 12, 2022 7:38 pm I will have to take my first RMD in 2023. Since bonds and CD returns are so abysmal, I was looking for other investments to hold my RMDs for the next 3-5 years just in case the market tanks. I am planning to calculate my RMDs and put that money in a High Dividend ETF and a value ETF. I was also looking for a REIT fund that would not be affected by a downturn in the market. I have read that since REITs have gotten so big, they no longer provide a hedge against a bear market. I would think that there are still some small REITS that would still provide a hedge. I would go out 5 years and then continue to extend it with the thought that regardless of what happens to the market it should recover in 5 years.

I would be interested in how others are planning their RMDs.
Criswold

It would be helpful to show us what the balances of rest of your portfolio in order to provide a full assessment moving forward, please use Laura’s template and guideline on presenting your portfolio:

viewtopic.php?f=1&t=6212

In my case, to answer your question, my AA is 90/10 with 61% SP500 VOO/VFIAX and 31% VGT, 10% cash or five years of expenses.

my Pretax balance is 1.6 million and I am 61, retired last August 2021 so in 11 years I plan to convert to Roth

My Roth IRA balance is 900K and contains mix of VGT/SP500

I am receiving a pension 66k and expect to apply for SSA at 70.

My process for preparing in advance for RMD tax bomb is convert as much pretax to Roth.

Additionally, some of my pretax will be drawn down for living expenses last year was 48k expenses.

My portfolio value is 2.6 million
Last edited by retire2022 on Fri Jan 14, 2022 4:02 pm, edited 1 time in total.
billfromct
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Re: RMD

Post by billfromct »

Stoic9 said:

“Have you thought of? I don't need my RMD. I plan to take it on 5 Jan (100K), place it in taxable. Then on 5 Dec I'll send IRS a check for 24K (24% tax bracket) out of my cash. If my taxable gains 10% over the year (10K) then I'll feel like I paid the IRS only 14K instead of 24K.”

So if your “taxable” goes down by 10%, does that mean you will feel like you paid the IRS $34k instead of $24k?

bill
Shallowpockets
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Re: RMD

Post by Shallowpockets »

I am close to recent poster in deferred accounts to the tune of mid 800k. My RMD will come due this year.
I have calculated it at about 31k.
31k!
So what is the big deal.
Having seen the amount I do not judge it to be in any way some sort of onerous task to be done, or paid taxes upon. Nor did I judge it to be worth doing Roth conversions previously considering my other taxable stuff.
31k. That is the RMD. Taxes are only the portion of that. Now your mileage may vary. But if you have twice that as a RMD liability, then probably you have much more money overall anyway. If your lifestyle spending is not supported sufficiently by now at RMD age you may have greater problems than paying taxes on that RMD.
All these shenanigans that people think about are a waste of time.
You earned far more over the years on your tax free (at the time) contributions to your tax deferred account.
sport
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Re: RMD

Post by sport »

Stoic9 wrote: Fri Jan 14, 2022 1:31 pm
Have you thought of? I don't need my RMD. I plan to take it on 5 Jan (100K), place it in taxable. Then on 5 Dec I'll send IRS a check for 24K (24% tax bracket) out of my cash. If my taxable gains 10% over the year (10K) then I'll feel like I paid the IRS only 14K instead of 24K.
By doing this you give up the ability to have QCDs count as part of your RMD. If you make donations to charity, this can be a very good tax break. You may also have to file a tax form for unequal estimated payments.
jdb
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Re: RMD

Post by jdb »

IMHO the best thing about RMDs, if you don’t need them, is the ability to donate money to charities through QCDs. I am in fortunate position of not needing the RMD so donate max $100K through QCDs every year. I do the donations last half of year to allow IRA additional time to earn tax deferred income. It is one of best things I do each year, giving monies to worthy organizations that need it far more than me, and saving on taxes. Highly recommend if you don’t need the RMD. Good luck.
Topic Author
Griswold
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Re: RMD

Post by Griswold »

This post took some unexpected turns, so I am going to get back to my original thought.

I am forced to take an RMD from my TIRA in 2022. I am 100% invested in equity etf's.

I will pay taxes on the withdrawal and put the rest in an emergency fund aka vacation fund.

I have read that value funds tend to fair better in a bear market.

I was thinking of putting my 2022 RMD into a value fund like one of these:

https://www.forbes.com/advisor/investin ... alue-etfs/

However, Ibonds have piqued my interest, but you have to hold them for 5 years. I see that there are a variety of inflation protection etf's which may be a safer bet.

Anyway, the idea is to hedge my RMD in case there is a downturn in the market. I thought it was a pretty simple sound concept
tdm757
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Re: RMD

Post by tdm757 »

I have an inherited IRA under the old rules and have a long runway. I decided this year to keep two and a half years of rmds plus $5,000 in a money market fund paying virtually nothing. On January 1st 2023 or thereabouts I plan to withdraw my rmd plus 5,000. The 5000 is just extra money I want and can use. During the year 2023 I plan to refill my bucket to get to the two and a half years plus 5,000 with hopefully appreciated gains from Investments. If the stock market is down all of 2023 and 2024, I will take the min rmd on 1/1/24 and 1/1/25. If Stock market is down all of 2025, I will take the min rmd on 1/1/26 and likely have to sell enough to make up half an rmd. I'm essentially letting the stock market be down for at least 2 years before I feel pain at selling at a low. The balance not in this bucket is 100% vtsax or equivalent.
tdm757
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Re: RMD

Post by tdm757 »

I have an inherited IRA under the old rules and have a long runway. I decided this year to keep two and a half years of rmds plus $5,000 in a money market fund paying virtually nothing. On January 1st 2023 or thereabouts I plan to withdraw my rmd plus 5,000. The 5000 is just extra money I want and can use. During the year 2023 I plan to refill my bucket to get to the two and a half years plus 5,000 with hopefully appreciated gains from Investments. If the stock market is down all of 2023 and 2024, I will take the min rmd on 1/1/24 and 1/1/25. If Stock market is down all of 2025, I will take the min rmd on 1/1/26 and likely have to sell enough to make up half an rmd. I'm essentially letting the stock market be down for at least 2 years before I feel pain at selling at a low. The balance not in this bucket is 100% vtsax or equivalent.
Topic Author
Griswold
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Re: RMD

Post by Griswold »

That's what I'm saying. I just wanted to try to earn something but earning nothing is better than losing money
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Munir
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Re: RMD

Post by Munir »

With an RMD, I look at it as a transfer and not a sale. I transfer the money from a tax-deferred account to a personal account and if I want to, I can immediately reinvest it in the same mutual fund that I just transferred the money out of in my IRA.
sport
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Re: RMD

Post by sport »

Griswold wrote: Thu Jan 27, 2022 7:54 pm This post took some unexpected turns, so I am going to get back to my original thought.

I am forced to take an RMD from my TIRA in 2022. I am 100% invested in equity etf's.

I will pay taxes on the withdrawal and put the rest in an emergency fund aka vacation fund.

I have read that value funds tend to fair better in a bear market.

I was thinking of putting my 2022 RMD into a value fund like one of these:

https://www.forbes.com/advisor/investin ... alue-etfs/

However, Ibonds have piqued my interest, but you have to hold them for 5 years. I see that there are a variety of inflation protection etf's which may be a safer bet.

Anyway, the idea is to hedge my RMD in case there is a downturn in the market. I thought it was a pretty simple sound concept
I may not understand what you are saying about I Bonds. However, you cannot put them into an IRA.
If you are talking about investing the RMD after you take it, I Bonds can be a good choice. You do not have to hold them for 5 years. The rules are that you cannot cash them for one year, and you lose the last 3 months interest if you cash them before 5 years.
RetiredCSProf
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Re: RMD

Post by RetiredCSProf »

I spend my RMD.

For example, suppose that my RMD is $24K. I would typically spend it as follows:
1. $3K for QCDs
2. $7K Income tax withheld for the RMD withdrawal (24% IRS; 9.3% CA income tax)
3. $12K Income tax withheld for a $36K Roth conversion (taken after RMD is satisfied but before end of calendar year)
4. $2K distribution toward a vacation, home maintenance, or for income taxes owed on the previous year

I keep 1-2 years of RMDs in the MM -- I refill the MM bucket in the 3rd quarter.

I tried ultra-short term bond funds for holding one year of RMDs but, recently, these are losing money.

Aggressive Roth conversions and a conservative 55/45 AA in my rollover IRAs have resulted in a slow growth during my first few years of RMDs. I will need to re-calibrate when I finish conversions.
Topic Author
Griswold
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Re: RMD

Post by Griswold »

It appears that for those of us who want to shelf our RMD's to be certain that we are not taking our RMD in a downturn, the consensus is holding the RMD in cash is the safest option.
dbr
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Re: RMD

Post by dbr »

Griswold wrote: Fri Jan 28, 2022 11:01 am It appears that for those of us who want to shelf our RMD's to be certain that we are not taking our RMD in a downturn, the consensus is holding the RMD in cash is the safest option.
Why would it matter if you take the RMD in a downturn? An RMD is not automatically a withdrawal from your portfolio. The general strategy is to set an asset allocation and rebalance it when out of balance by too much. Otherwise an RMD is just a transaction that moves assets from a tax deferred account to a taxable account and imposes a regular tax cost along with all other tax costs, after which any variety of other transactions involving withdrawals or involving reblancing might happen. If stocks are down then one would buy more stocks using fixed income. If fixed income does not deliver enough return, then one needs to harden up and live with it or take more risk in stocks to try for more return, if the risk can be afforded.

Even the general idea of keeping a cash reserve "to spend from" in a taxable account is hard to show as being particularly helpful except for psychological assurance.
sport
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Location: Cleveland, OH

Re: RMD

Post by sport »

If you are going to spend the RMD, keeping it in cash is not a bad idea. You need to take spending money from somewhere.
Topic Author
Griswold
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Re: RMD

Post by Griswold »

I agree - if you are not going to reinvest your RMD then keep it in a cash account of your TIRA until you take it out.

I think I see what dbr is saying. If my asset allocation was balanced, I could take my rmd from either Bonds if the market is down or stocks if the market is up and then rebalance. Unfortunately, I am currently in 100% stocks. I may need to rethink my asset allocation.
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