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johnd --
That's my current "working theory".......Savings Account at the same bank as the "house" checking account.
May I ask you if there was a decent Interest Rate at your Savings Acct ?? It's a small difference between 0.01% and 0.05% at these amounts.
I was also thinking of Dollar Cost Averaging "out" with the RMD's in monthly installments -- Not sure if that's worth the effort.
johnd --
That's my current "working theory".......Savings Account at the same bank as the "house" checking account.
May I ask you if there was a decent Interest Rate at your Savings Acct ?? It's a small difference between 0.01% and 0.05% at these amounts.
I was also thinking of Dollar Cost Averaging "out" with the RMD's in monthly installments -- Not sure if that's worth the effort.
The rates returned are near enough to nothing to ignore. Any growth happens in the 401k/IRA.
I'm no expert, but I think Dollar Cost Averaging Out does not have the same advantage as DCA in.
WW2 --
Yes, the best deal I found was from Navy Fed Credit Union. They also have a brick & mortar building close by.
john --
Your method waits to take the whole RMD during a runup, correct ?? Without trying to guess the exact top of market, it may have it's advantages. The only advantage of DCA Out, is to meet a Savings Acct Direct Deposit Reqt, which could be done with the Pension Deposit.
Up until recently (I am 74), I took my RMD's every January in one lump sum, with no taxes withheld. I would then invest them in several non-IRA Mutual Funds I have. I dealt with the taxes come tax time.
My wife passed last year and without her SS and retirement (no survivor benefits) I find myself needing some extra money each month. I have it set up with two of my Mutual Funds to send me a check (direct deposit to my checking account) each month. I have them arrive on the 1st and the 15th of the month and my SS arrives the 3rd Wed of the month. Any extra at the end of the month gets re-deposited back into the Mutual Funds or to a small savings account for fast cash if needed thus I do not keep much cash in the checking account. I also have a debit card on this account which I use for my daily living expenses like gas, food, dinner, liquor store, etc. I also keep a few hundred dollars in my pocket for odds and ends like coffee, drinks, breakfast, lunch, etc.
I have not touched my IRA's (Mutual Funds) yet (other than required RMD) and this year I will continue to have them send me RMD's in January. I may adjust this depending on my tax situation as this will be my first year as a Single Filer. I may have them sent monthly with taxes taken out but I will wait to see about that and decide in early 2017.
I directly own some stock but I am going to start to wind down (slowly sell) those off.
I have no debt plus I recently decided that at my age (74) and single, I am sitting on to much money for my "retirement" so I have made the decision to spend a bit more and enjoy it while I can. I have no concerns about leaving an estate.
I think some are a bit paranoid about their accounts getting raided. Easy to online transfer money from checking/debit account to savings accounts and back as needed.
I don't sell off any investments for the RMD. I subscribe to the bucket theory (thanks to Mathjak). At least three-four years' RMDs are in cash in a Treasury/money market fund. The cash bucket is refilled from one of the other investments at the appropriate time - i.e., when the market is up. Imo, DCA selling for RMD is not good. What if you're doing this when the market has crashed - like in 2008?
Quote:
the role cash can play in both a market downturn and in portfolio returns. Generally, it’s suggested that investors have three to five years of cash readily available from their portfolio to weather market storms.
For example, in 2008-2009 investors without ample cash were stuck selling investments for less than they hoped for. However, for those with cash-at-hand, the great recession had a lesser impact because they were able to tap liquid funds instead of reducing their investment holdings during the downturn.
In cases like this, the more cash you have the better off you are. Remember, it took the Dow roughly five years to get back to its previous record high. Forbes Welcome
I do an electronic transfer from the IRA Treasury fund to my local bank money market fund once a year, usually in December before I pay property taxes, but if there is a need earlier in the year I may transfer the funds, then. Cash flow during the year is then allocated to replenish at year-end when I pay taxes. Money fund and checking are not linked through any debit or atm card. When I need the distribution, I electronic transfer to checking, or write a check directly out of the money market fund.
Ari--
I also subscribe to the Bucket Approach by Morningstar, and it has served us well. I count the Cash and CD's as part of the Bond Portion of our Allocation. The CD Ladder is currently at a rolling 12 months til we see where Rates are headed. The Cash is ready to move into Bonds or Stocks as appropriate.
Question about the timing of your RMD transfer into your local bank --I'm wondering if taking it in December, and owing tax on it right away next April has any downside ??
Would it be better to take it in January and have the easy access to it all year ?
I agree with the cash bucket. It does not have to be in your IRA. If you have a cash bucket outside of the IRA you can sell investments in the IRA for the MRD and then buy the investment back with the cash bucket outside of the IRA if you really wanted to keep that particular investment. You will get a new tax basis on the investment and that may help.
My RMD goes into my regular checking account monthly. I use it to pay my bills and live on. My SS goes in also. I need the money to live on. My checking is with Chase and I have a debit card. No restrictions or fees involved.
IRA is with Fidelity and I have it automatically sent to Chase on the 1st of every month.
Easy, peasy,
I'm no tax expert beyond dumbly following the instructions of tax software to do my taxes, but I'm thinking if RMD is taken out early in the year, Tax must be paid for it early in the year either through with holding or estimated payments.
Last year I took the RMD in December and made an estimated tax payment also December. Because an estimated tax payment was made, my tax program seemed to want to see quarterly estimated tax payments. Seems that extra forms were added to decide whether I owed a penalty. This year I had enough extra withheld from the RMD so tax fileing should be slightly simpler.
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