RMD

[marathonwmn]

For the last two years, when taking my RMDs, I've transferred shares in FSKAX (Fidelity Total Market Index Fund) directly to my brokerage account since I don't need the proceeds. The primary reason has been to not realize the loss in value.

Is this a smart move?

Thank you.

[Chadnudj]

I'm unfamiliar with this type of move, but wouldn't you want to have the stepped up basis so that if/when you sell them in your taxable account you realize lower capital gains taxes?

[dbr]

It is a perfectly reasonable thing to do but neither smart nor not smart.

Whether or not you realize a loss in a tax deferred account is relevant to nothing. Selling in the account and transferring the money is just a question of what you are going to do with the money next. If that means buying the fund back, then transfer in kind makes sense. If you are going to make some further change then you do that and maybe getting the cash would be simpler.

Be sure when you have transferred in kind that you now know the cost basis for the holding. The broker should have it right and for a mutual fund should be clear-cut. https://tickertape.tdameritrade.com/ret ... ew%20basis.

[stan1]

It is a perfectly reasonable thing to do but neither smart nor not smart.

Whether or not you realize a loss in a tax deferred account is relevant to nothing. Selling in the account and transferring the money is just a question of what you are going to do with the money next. If that means buying the fund back, then transfer in kind makes sense. If you are going to make some further change then you do that and maybe getting the cash would be simpler.

Be sure when you have transferred in kind that you now know the cost basis for the holding. The broker should have it right and for a mutual fund should be clear-cut. https://tickertape.tdameritrade.com/ret ... ew%20basis.

I had no idea it was possible to do a transfer in kind. Does Vanguard or Fidelity support doing a transfer in kind via their web sites? Most people aren't going to have cost basis for a rollover IRA from a 401K, for example. Can a transfer in kind be done from an inherited IRA which might have a better known cost basis?

However, I'm wondering if OP is using the term "transfer" to mean selling shares for cash in the IRA then buying more of the same shares in the taxable account, which is a more typical approach to taking an RMD.

[dbr]

It is a perfectly reasonable thing to do but neither smart nor not smart.

Whether or not you realize a loss in a tax deferred account is relevant to nothing. Selling in the account and transferring the money is just a question of what you are going to do with the money next. If that means buying the fund back, then transfer in kind makes sense. If you are going to make some further change then you do that and maybe getting the cash would be simpler.

Be sure when you have transferred in kind that you now know the cost basis for the holding. The broker should have it right and for a mutual fund should be clear-cut. https://tickertape.tdameritrade.com/ret ... ew%20basis.

I had no idea it was possible to do a transfer in kind. Does Vanguard or Fidelity support doing a transfer in kind via their web sites? Most people aren't going to have cost basis for a rollover IRA from a 401K, for example. Can a transfer in kind be done from an inherited IRA which might have a better known cost basis?

However, I'm wondering if OP is using the term "transfer" to mean selling shares for cash in the IRA then buying more of the same shares in the taxable account, which is a more typical approach to taking an RMD.

No, you transfer the shares in kind, and, as explained in the article, the cost basis is set to the value on day of transfer. You just want to note what that is and verify that your broker has the right number.

[HueyLD]

For the last two years, when taking my RMDs, I've transferred shares in FSKAX (Fidelity Total Market Index Fund) directly to my brokerage account since I don't need the proceeds. The primary reason has been to not realize the loss in value.

Is this a smart move?

It is if you don’t need the cash and you don’t want to sell low.

However, make sure that:

(1) You transfer enough shares to meet the RMD dollar requirement.

(2) The basis of those transferred shares has been reset to the market value on the date of transfer. Make sure that Fido updates your basis properly.

[marathonwmn]

However, I'm wondering if OP is using the term "transfer" to mean selling shares for cash in the IRA then buying more of the same shares in the taxable account, which is a more typical approach to taking an RMD.

Stan,
I'm transferring actual shares not selling for cash and then repurchasing.
I go to a local Fido office and they do it while I sit in the office. That way the share value doesn't change from one day to the next. Perhaps it can also be done over the phone although I'm not sure.
Best,

[Billyboy]

Vanguard will transfer an RMD in kind because I did so in January, from a brokerage to Vanguard. The transfer consisted of all shares that I eventually sold but could have kept if I wanted to.

[delamer]

I'm unfamiliar with this type of move, but wouldn't you want to have the stepped up basis so that if/when you sell them in your taxable account you realize lower capital gains taxes?

The basis for the shares now in the taxable account becomes the day of transfer. It doesn’t carry-over from the IRA.