RMD Now Or Later in Year?

[TrvlBug]

This Q didn't seem to fit in the Coronavirus Fin'l Impacts II thread. DH usually takes his RMD as one lump sum in the fall. We have all of our taxes pulled from the distribution. Given that the markets will most likely continue to go down, does it make sense to pull it now? $120K. I'll do quarterly taxes this year and forego QCDs, instead distributing our usual charitable monies from our DAF which has a substantial amount in it just for these occasions. Thoughts...now or later as usual?

 

[audreyh1]

You can set aside the funds for your RMD at any time independent of when you pull the funds out of the IRA.

Can’t advise you on the timing.

 

[kgtest]

I feel like this is a great example of having cash when RMD comes due. Then you can just plow the RMD back into the market and live on your cash until the high's return.

 

[Animorph]

Like audreyh1 said, you can take it out at any time.

If you need to sell equities in order to fund the withdrawal, I might wait and see if this really is just a short dip.

If you need to sell bonds to fund the withdrawal, now doesn't seem like a bad time. And with bonds your timing is much less important since they don't vary as much as equities.

If you were just going to invest the RMD in a taxable account with the same AA as the retirement account the timing is much less important. Maybe some limited amount of gains will be taxed, or maybe you will generate a tax deductible loss.

Paying taxes however means spending at least some of the RMD, so it would be nice to execute sales in the retirement account at the highest prices available to you between now and the end of the year.

The dollar amount of the RMD and the taxes you will pay on that "income" are pretty much set in stone as of Dec 31 2019. All you can do is try to leave as much in your retirement account as possible. And our crystal ball is cloudy, as usual.

 

[travelover]

In the last crash, RMDs were suspended for a year, so I'd wait.

 

[audreyh1]

In the last crash, RMDs were suspended for a year, so I'd wait.

They weren’t suspended for 2008 which saw the biggest drop. They were suspended for 2009. I wouldn’t count on it.

 

[Sunset]

In difficult situations like this where the known is unknown, I split the difference.

Get $60K ready to go, meaning turn it into cash and buy a money market (interest earner) with it now.

Do the other $60K later at the normal time.

That way you are 1/2 correct no matter if this is a low or a high point in the market.

 

[sanfanciscotreat]

Took 50K out in January before the downturn. Will wait till later in the year after a return, hopefully for the other 50K

 

[Koolau]

As luck would have it (even after today's debacle) my stock portion is still UP for the year (not quite its high, but UP.) Still, I plan to pull money from my Stable Value fund for my RMD.

By the way, I've always withdrawn early in the year (January to early March). I've forgotten: Is there any date (other than Dec. 31) by which this year's RMD must be withdrawn? Anyone know? Thanks.

 

[VanWinkle]

When do you need the money? That would govern my RMD as long as it was before the year ends.

 

[audreyh1]

As luck would have it (even after today's debacle) my stock portion is still UP for the year (not quite its high, but UP.) Still, I plan to pull money from my Stable Value fund for my RMD.

By the way, I've always withdrawn early in the year (January to early March). I've forgotten: Is there any date (other than Dec. 31) by which this year's RMD must be withdrawn? Anyone know? Thanks.

Dec 31 is the deadline for all years except the starting year.

 

[lemming]

If you are planning on spending the money I would wait. If you are reinvesting it then sell low and buy low.

 

[TrvlBug]

We've pretty much decided to do half and half (it's actually $140K we have to pull out this year). This will allow us to also do QCDs later this year if we decide to go that route rather than use our DAF.

Don't need the money but this half would be used to replenish our emergency cash bucket where I pulled out mucho bucks this year to pay for our landscaping. It's all in short term bonds and the only part of our portfolio that's up . The other half would pay for taxes and QCDs.

 

[OldShooter]

This Q didn't seem to fit in the Coronavirus Fin'l Impacts II thread. DH usually takes his RMD as one lump sum in the fall. We have all of our taxes pulled from the distribution. Given that the markets will most likely continue to go down, does it make sense to pull it now? $120K. I'll do quarterly taxes this year and forego QCDs, instead distributing our usual charitable monies from our DAF which has a substantial amount in it just for these occasions. Thoughts...now or later as usual?

We will wait to pull my small RMD from a 100% stock inherited IRA until near the end of the year. I disagree completely with the idea that "... markets will most likely continue to go down ... " and believe that by waiting I will be selling higher. IOW all this excitement about the virus will in hindsight be seen as a very overblown reaction to a serious but not catastrophic problem. When the dust settles we will probably hear about significant false positive testing rates and fatality rates found to be under 1%.

For our our more serious RMDs, very low six figures from IRAs, we have long since allocated enough to our fixed income tranche that we won't need to touch the equities for several years if that becomes necessary.

 

[38Chevy454]

We will wait to pull my small RMD from a 100% stock inherited IRA until near the end of the year. I disagree completely with the idea that "... markets will most likely continue to go down ... " and believe that by waiting I will be selling higher. IOW all this excitement about the virus will in hindsight be seen as a very overblown reaction to a serious but not catastrophic problem. When the dust settles we will probably hear about significant false positive testing rates and fatality rates found to be under 1%.

I agree with OldShooter, and am waiting for any RMD from my also inherited IRA.

 

[GalaxyBoy]

I think I like the “half now and half later” approach mentioned above. I have an inherited annuity I’m withdrawing over five years which is in a total stock market fund. I’ll leave my inherited IRA RMD for late in the year since its in a bond fund. Both will be reinvested in a taxable account.

[edit to add] sorry I hit post too quick. My other consideration is that I use these withdrawals to pay Uncle Sam. I hate to give the IRS a free loan, but OTOH I wouldn’t earn much interest on that cash anyway.

 

[audreyh1]

We will wait to pull my small RMD from a 100% stock inherited IRA until near the end of the year. I disagree completely with the idea that "... markets will most likely continue to go down ... " and believe that by waiting I will be selling higher. IOW all this excitement about the virus will in hindsight be seen as a very overblown reaction to a serious but not catastrophic problem. When the dust settles we will probably hear about significant false positive testing rates and fatality rates found to be under 1%.

I would be absolutely thrilled if that were the outcome, but I’m not counting on it.