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Old 04-09-2012, 10:55 PM   #1
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My husband and I both have pensions. We both have our own health care. I am about 12 years younger then him. I work part time. He had to take his first RMD this year. We don't plan on using the money. My question is should my husband's IRA and 401k be invested any differently then his usual asset allocation of 65/35. Should he keep some in cash?
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Old 04-10-2012, 04:13 AM   #2
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Hopefully there is one investment plan and asset allocation that covers all the accounts. If not, and the RMDs aren't needed, perhaps they can be used to set aside some emergency funds in a bank account.
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Old 04-10-2012, 05:34 AM   #3
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Your AA target is across all of your taxable, tax-deferred and tax-free accounts. Typically your fixed income allocation would be in your tax-deferred or tax-free accounts to minimize taxes and your equities would be in taxable accounts since equities generate less taxable income.
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Old 04-10-2012, 07:46 AM   #4
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Perhaps another way of asking your question is whether short term needs
(known in your case or unknown in the case of emergencies) should be kept in cash. There seem to be various schools of thought. Perhaps the right answer is person-dependent. If stocks and bonds both dropped significantly, how would you feel taking the same RMD from a depleted portfolio? Do you think the chances of that happening significant? If not, perhaps take the RMD from the asset class that didn't lose as much as a form of rebalancing. I'm assuming you are asking about a small cash position (perhaps 1-2 yrs of RMDs or 5-10% of retirement plan) that you would replenish periodically just for the RMDs)?
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Old 04-10-2012, 08:22 AM   #5
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Is the question related to RMD's in general, or "excessive RMD's" - that is, withdrawls not needed for living expenses, but withdrawls required due to current tax laws.

The other question is if it is excessive RMD's, do you want to invest for your lifetime(s), or for those of the future. If it's for the "next generation(s)", my suggestion would be to look at their entire lifespan and invest the $$ agressively - at this time. I ask this due to having a disabled (adult) son, who we treat our "remainder estate" in a different manner than our own. We are more agressive with "his future money", quite differently than we treat our "remainder life" money.

Just wondering...
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Old 04-10-2012, 10:14 AM   #6
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You may be able to replace whatever you need to sell in a 401k/IRA with a simultaneous buy in your taxable account. Or buy it a few days later with the RMD funds if necessary. In that case you don't really need to worry about disturbing your AA or raising extra cash ahead of time. Or you can do the same thing a little earlier so that normal cash within your AA is sitting in the 401k/IRA ready for the RMD when the time comes. Either way, stick to your AA. Only the location of your assets is changing, not the AA.
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Old 04-10-2012, 01:50 PM   #7
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My tIRA and Roth have the same balanced fund. For me it was how many shares out of one and into another.
For me experiences are not good or bad, just different
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Old 04-10-2012, 05:28 PM   #8
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We have the bulk of our savings in Tax Deferred accounts. The RMD is not needed for day to day expenses. I will probably be investing it into Vanguard Total Stock Market Index or into Vanguard Total International Stock fund. We have about 5% in cash in American Express Savings account but its outside the tax deferred accounts. Is the Wellington good for a taxable account?
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Old 04-11-2012, 01:20 PM   #9
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Originally Posted by Carol911 View Post
He had to take his first RMD this year. We don't plan on using the money. ?
You might consider using this money toward a ROTH conversion. Doing this for a few years would reduce future mandatory withdrawals. You might also consider placing any of your non-tax efficient investments in the ROTH IRAs.
Pigs get fat, hogs get slaughtered. That's my story and I am sticking to it.
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