Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
What is the reason for not wanting to take rmds from a declining fund? If you plan on holding the fund you would have some potential tax benefit if it declines after you move it
You don't want to be selling equities after a correction because you're reducing your chances for future growth.
Further, 401K/IRA - selling within retirement vehicles has no tax consequence and the opportunity for tax-free growth within the 401k/IRA is also lost.
Of course, RMD's - unless in a Roth - are taxable as ordinary income when withdrawn. But the whole point of an IRA/401K is to allow growth tax-free within the retirement vehicle - hopefully providing a longlong source of funds - without exposure to annual capital gains tax consequence. Also, over time, one can convert tax-deferred retirement vehicles to a Roth, further reducing exposure to forced ever-increasing taxable withdrawals as one ages.
Quote:
Originally Posted by rjm1cc
I think long term bond funds will decline as interest rates increase. Consider sell some now and putting the cash in CD's and then remove the CD's as needed to meet the RMD's. If you think the market might be down for a couple of years then put that amount of money in CD's. CD's probably need to be cashed in before moving to a taxable account. Check your broker.
Yup. Thanks to this board and mathjak, I've always kept enough cash/cash equivalents on the sidelines to cover anywhere from two-six years RMDs - right now it's up to six years currently in a reserve fund paying about 2%. I don't own any bond funds at this time.
With an adequate cash-on-the-sidelines strategy, RMD's have no affect whatsoever on invested assets. You can withdraw from the cash without disturbing the goose that lays the golden eggs, should that goose be taking a rest or under the weather. Given the uncertain future globally, increasing cash and reducing equity and bond exposure is wise, imo.
OP - if you've never heard of the bucket strategy, Morningstar has an extensive section. Christine Benz has constructed model portfolios based on your risk tolerance for Vanguard, TRowePrice et al. investors.
You don't want to be selling equities after a correction because you're reducing your chances for future growth.
Further, 401K/IRA - selling within those vehicles have no tax consequence. Therefore, selling at a loss within a retirement vehicle provides no tax benefit whatsoever. On top of that, the opportunity for tax-free future gains is also lost.
Of course, RMD's - unless in a Roth - are taxable as ordinary income when withdrawn. But the whole point of an IRA/401K is to allow growth tax-free.
Yup. Thanks to this board and mathjak, I've always kept enough cash/cash equivalents on the sidelines to cover anywhere from two-six years RMDs - right now it's up to six years currently in a reserve fund paying about 2%. I don't own any bond funds at this time.
With a adequate cash-on-the-sidelines strategy, RMD's have no affect whatsoever on invested assets. You can withdraw from the cash without disturbing the goose that lays the golden eggs, should that goose be taking a rest or under the weather. Given the uncertain future globally, increasing cash and reducing equity and bond exposure is wise, imo.
OP - if you've never heard of the bucket strategy, Morningstar has an extensive section. Christine Benz has constructed model portfolios based on your risk tolerance for Vanguard, TRowePrice et al. investors.
I wasn’t talking about selling, I specifically said if you plan on holding on to the fund because you can take your rmd by simply moving shares and there is no need to sell
I wasn’t talking about selling, I specifically said if you plan on holding on to the fund because you can take your rmd by simply moving shares and there is no need to sell
Apologies...thanks for clarifying. I wasn't sure what you meant, until rjm1cc said this:
Quote:
My broker will move securities from a retirement account to a taxable account so I do not have to sell and buy. It counts toward the RMD's.
I don't have a brokerage account other than with TRP and Fidelity for my IRAs, and don't know if either will do this. I do need some cash RMDs, but not the amounts mandated, so mitigate future mandatory withdrawals by doing partial Roth conversions each year. I don't want any taxable exposure, if I can help it.
We take 50% RMD's monthly from two mutual funds (income funds). We take RMD's monthly as I like letting my other investments continue to grow over the year.
We keep cash in the IRA to pay the other 50%. The cash is held in Fidelity money market paying about 1.5%.
All our investments are in Fidelity and they handle the RMD's monthly.
We need the RMD's to live on each month. I don't like the concept of taking a lump sum at the beginning of the year.
Yup. Thanks to this board and mathjak, I've always kept enough cash/cash equivalents on the sidelines to cover anywhere from two-six years RMDs - right now it's up to six years currently in a reserve fund paying about 2%. I don't own any bond funds at this time.
With an adequate cash-on-the-sidelines strategy, RMD's have no affect whatsoever on invested assets. You can withdraw from the cash without disturbing the goose that lays the golden eggs, should that goose be taking a rest or under the weather. Given the uncertain future globally, increasing cash and reducing equity and bond exposure is wise, imo.
I guess I am just more stupid than usual--
I don't understand what you mean by "keeping cash/cash equivalents on the sidelines to cover two-six years RMDs"
Essentially, I don't have to sell equities and/or bonds at possibly depressed prices for the RMD - I draw from cash, instead. Thus, market volatility doesn't cause a panic b/c I don't need to sell anything when market has tanked. I can wait it out for a few years while market recovers, because the cash is already put aside. Think of it as an emergency fund. After a few years, hopefully market has recovered some and I can sell appreciated equities to replenish cash if necessary.
Up until this year, I had only 2-3 years cash (10-12%), 25% in Wellesley (VWINX), about 65% equities. But, with the bond market doing less than zero and equities essentially flat, what normally would be in Wellesley is in cash. Wellesley ytd, even with the 40% equity component, is -1.71%. I'm staying out of bonds until the Fed is done with its rate hikes. Right now MM funds at TRP are paying about 1.9%.
I am thinking about buying Treasuries with that cash, but not sure how to go about this at TRP as system won't allow me to enter an online order for govts in my IRA - only mutual funds, stocks, and ETFs. T-bill discounts get better with each auction. If, after broker's fee, I come out ahead, I'd rather invest the cash there.
Last edited by Ariadne22; 10-17-2018 at 12:09 AM..
this whole not spending equity money when markets are down thing is really a myth . the truth is that in practice equities unweighted with no cash or bonds used generally goes up so much more in up markets that spending in down markets even in retirement is just about the same as 50/50 would be . it is just a wilder ride .
you have 100% equities surviving 93% of the 118 30 year retirement periods and 50/50 surviving 95% .
but in the case of rmd's you can simply change the tax status on what you have buy selling in a retirement account and buying in a taxable account .
In planning for RMD withdrawals for 2019, I would like some opinions as to the best strategy to take. I don't want us to be in the position of taking withdrawals from mutual funds which are declining in value.
At present our withdrawals are from several IRA's, a 457 and a 401 so several sources for mandatory withdrawals.
I'm thinking that where applicable, to take one withdrawal from a Stable Value Option and the others from bond funds.
Or should it be wise to transfer the entire amount into a cash account at the beginning of the year?
RMDs are approximately 3.8% of your funds. So, since the Rule-of-Thumb withdrawals is pegged at 4% a year it is not a terrible burden on your accounts. I would only place about 6 months living expenses in cash as there is no return. My strategy at the moment is to place the 4% into tax free bonds.
Of course, that is only my opinion at the present time. It might change as the economy does its rollercoaster course thru space...
Essentially, I don't have to sell equities and/or bonds at possibly depressed prices for the RMD - I draw from cash, instead. Thus, market volatility doesn't cause a panic b/c I don't need to sell anything when market has tanked. I can wait it out for a few years while market recovers, because the cash is already put aside. Think of it as an emergency fund. After a few years, hopefully market has recovered some and I can sell appreciated equities to replenish cash if necessary.
Up until this year, I had only 2-3 years cash (10-12%), 25% in Wellesley (VWINX), about 65% equities. But, with the bond market doing less than zero and equities essentially flat, what normally would be in Wellesley is in cash. Wellesley ytd, even with the 40% equity component, is -1.71%. I'm staying out of bonds until the Fed is done with its rate hikes. Right now MM funds at TRP are paying about 1.9%.
I am thinking about buying Treasuries with that cash, but not sure how to go about this at TRP as system won't allow me to enter an online order for govts in my IRA - only mutual funds, stocks, and ETFs. T-bill discounts get better with each auction. If, after broker's fee, I come out ahead, I'd rather invest the cash there.
don't forge the feds short term action may not have anything to do with bonds at some point . bonds and shorter term rates can move opposite as well at times .in fact the bond market may even fall farther if the fed stops raising short term rates if it smells inflation .
if you think stocks are hard to time bonds are far worse . at times good news is good news for bonds and at other times good news is bad for bonds .
but one thing you can count on and that is if there is a whiff of recession in the air treasury yields will fall
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
