MRD vs cash flow from investments

[oldman]

If I decide to take 4% from investments in retirement, is the minimum required distribution considered as part of that? For instance if I have $600,000 and 4% is $24,000 and my minimum MRD is already $24,000, have I overdrawn? That is all I am taking because I still earn income at age 74. From the $24,000 I take Roth contributions for wife and I, total $12,000 for 2008. That leaves $12,000 I don't need to live on right now but soon will. I can just invest it or put in a CD or money market. No reason to take more from my investments, but when I do, I assume the $24,000 will be considered cash from investments.

[DblDoc]

The 4% withdrawal rule is for what you spend. Like you said you can reinvest the portion of the RMD you don't need.

DD

[jIMOh]

You could convert the RMD to the Roth if you wanted to.
meaning if you need 24k to live on, and a job plus roth covers that, then withdraw the RMD and immediately convert it to a Roth. You still need to pay taxes on it.

If you looked at tax brackets cap, it might make sense to convert more than the RMD to a Roth. because
a) current tax rates are low
b) it lowers your RMD amount for next year
c) it prevents you from paying taxes after money is converted

[OAG]

Withdrawals are just that, they cannot be converted to a ROTH. If eligible, conversions must occur from T-IRA assets prior to the funds being withdrawn as an RMD.

[haha]

Quote:

Originally Posted by R Wood Withdrawals are just that, they cannot be converted to a ROTH. If eligible, conversions must occur from T-IRA assets prior to the funds being withdrawn as an RMD.

I think he is not talking about a conversion; merely about making his RMD, then also making a Roth contribution from his earned income.

Ha

[FinanceDude]

Quote:

Originally Posted by jIMOh You could convert the RMD to the Roth if you wanted to. meaning if you need 24k to live on, and a job plus roth covers that, then withdraw the RMD and immediately convert it to a Roth. You still need to pay taxes on it. If you looked at tax brackets cap, it might make sense to convert more than the RMD to a Roth. because a) current tax rates are low b) it lowers your RMD amount for next year c) it prevents you from paying taxes after money is converted

You have to have earned income in this scenario........

[Nords]

Quote:

Originally Posted by jIMOh You could convert the RMD to the Roth if you wanted to. meaning if you need 24k to live on, and a job plus roth covers that, then withdraw the RMD and immediately convert it to a Roth. You still need to pay taxes on it. If you looked at tax brackets cap, it might make sense to convert more than the RMD to a Roth. because a) current tax rates are low b) it lowers your RMD amount for next year c) it prevents you from paying taxes after money is converted

Do you mean "contribute the RMD to the Roth" instead of "convert"?

I understand that an IRA contribution requires earned income, and I understand that the IRA contribution limits may be far less than the amount of an RMD, but I'd want to carefully read through IRS Pub 590 before I put more money into an IRA at that age.

Might be less "taxing" to just gift it to the beneficiaries...