Which fund to take RMD from?

[disneysteve]

I have to start taking RMDs from my inherited IRA this year. The traditional IRA is in 2 bond funds, VBTLX and VUSFX. VBTLX has had a lousy year, down 10+%. VUSFX, being ultra short term, has fared much better, only down about 1%. I have enough in either one of them to cover the RMD. Which would you do and why?

 

[SecondCor521]

Whichever one got me closer to my target AA in my IPS. If I were already at my target AA, then I'd take from each in proportion.

 

[disneysteve]

Whichever one got me closer to my target AA in my IPS. If I were already at my target AA, then I'd take from each in proportion.

They’re both bond funds so not really any difference from an allocation standpoint.

 

[DrRoy]

You would have to be able to predict future long term interest rates to make the "right" decision. When in doubt, I split the difference. Do half from each.

 

[disneysteve]

You would have to be able to predict future long term interest rates to make the "right" decision. When in doubt, I split the difference. Do half from each.

Darn cloudy crystal ball


I think you're right. Just take some from each and be done. In the grand scheme of things, it probably won't make much difference either way.

 

[oldtimer]

They’re both bond funds so not really any difference from an allocation standpoint.

What is the sub-allocation of your fixed income allocation? Just as you have an US/International sub-allocation for equities. Take $$ from both ST & IT bond funds in proportion to get back to your target sub-allocation for bonds.

 

[Graybeard]

With 1 bond fund down 10% you have to sell a lot more shares at a loss than from the fund that is down just 1%. Wouldn't the obvious answer be the fund that has lost the least is the one to take the RMD from?

I'm confused about this too. I have to take an RMD this year. I go back and forth about whether to take it from the Total Stock Market Index or my Settlement Fund. The TSMI is down a lot so the Settlement Funds seems better. The money will go into my taxable account as I have no need for it as income. I wanted the stock market to be high like 4500 area, take it from TSMI and park the money in the taxable account's Settlement Fund or 1 month T bills and when/if the stock market drops a lot then buy the TSMI in the taxable account. Pure market timing, sell high and buy lower, but it seems like a better method. The point is, all I ever did was accumulate, having to sell something is not something I am familiar with.

I'm not really asking for advice on what to do cuz I don't want to hijack Steve's thread, just expressing how, like Steve, I am not really sure how to handle this as it is something I have never done.