Inherited IRA
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steelyman
Moderator Emeritus
I take the RMD for my inherited IRA at the same time as you: as early as possible in the year. The dollar amount is known since it’s based on the December ending balance so that’s constant. It helps me to have that in the books and in the rear view.
Fidelity has placed the 2020 RMD orders in my account already and they’ll execute tonight. As always the total matches to the penny my calculations.
[ADDED] Fidelity will also arrange for tax withholding at my specified percentage, avoiding surprises at tax time (it’s a traditional, not Roth, IRA).
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SecondCor521
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My Dad has it set up to do 1/12th monthly on the 15th so it's his paycheck. His RMD is the majority of his income, so it works well that way. Also he doesn't have to worry about it anymore (although he continues to ask about it from time to time).
LRDave
Thinks s/he gets paid by the post
We are waiting to the end of the year. We will use the RMD to fund fed & state tax withholding, so no need to lend it to the IRS.
Ignoring market timing and when I need cash, I'm inclined to leave the $ in the IRA as long as possible. Primarily for the fraud (it takes more than a rogue ACH to withdraw from an IRA) and liability protection of the funds (depending on your state laws). Income earned while the $ are in the IRA stay in the IRA (subject to future RMDs) while income earned on the withdrawals never has the opportunity for the IRA protections.
Over the course of time it probably doesn't matter much, but as a lean RE I also pick up pennies off the sidewalk.
Over the course of time it probably doesn't matter much, but as a lean RE I also pick up pennies off the sidewalk.
ripper1
Thinks s/he gets paid by the post
In the book and in rear view.....precisely...thanks Steelyman.
Another Reader
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I treat it as a monthly payment and withhold taxes based on total estimated taxable income. Fidelity has been a PITA this year. No number until last night and then a non-existent automatic withdrawal of zero appeared and prevented me from setting it up until this morning when that disappeared. All appears in order now.
OldShooter
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I don't try to market time RMD withdrawals, which is what you're talking about. I just pull money as I need it. There is no guarantee that leaving the money in for most of the year will result in its growing.
Same here for federal withholding, if needed. Usually I do this in the first week of December. By then, any income "surprises" have been accounted for. Last month, we distributed more than the RMD from my inherited IRA, so I needed to withhold a bit of federal taxes.
RMDs are one of the few places you can time the market, thanks to the December 31 deadline. Without a deadline, guessing when to withdraw funds can cause you to miss gains of the following years. With a December 31 deadline, you can withdraw after a run up of any amount/duration you prefer, and you'll be ahead moneywise of where you would be had you withdrawn sooner, and with no risk gains of future years will make your withdrawal timing poor.
scrabbler1
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My (snake-bit) friend has an inherited IRA since 2012, when his remaining parent (mom) passed away. I help him out in handling his portfolio. He still works full-time, so he doesn't need the ~$3k RMD for his everyday expenses.
I have set up the IRA so that it generates enough cash to pay the RMD. I realize that there will be appoint where the RMD will exceed the cash which builds up throughout the year, but for now and in the foreseeable future this system works fine.
We use his RMD to pay some federal and state income taxes via Form 1099-R withholding. Whatever isn't needed to get him close to what his W-2 withholding already covers (he has significant investment income) stays in his brokerage account or goes to his local bank account. So, he ends up owing little in April.
I have set up the IRA so that it generates enough cash to pay the RMD. I realize that there will be appoint where the RMD will exceed the cash which builds up throughout the year, but for now and in the foreseeable future this system works fine.
We use his RMD to pay some federal and state income taxes via Form 1099-R withholding. Whatever isn't needed to get him close to what his W-2 withholding already covers (he has significant investment income) stays in his brokerage account or goes to his local bank account. So, he ends up owing little in April.
ExFlyBoy5
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Just did mine today. Once the funds are available, it'll get shifted to my taxable brokerage account. I don't want to risk "forgetting" through the year and getting nailed with the 50% penalty. Uncle Sugar gets enough of my money as it is. 
Another Reader
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Forgot to add that treating the withdrawal as monthly "income" helps when you want to buy a car or take out a mortgage. The RMD is not insubstantial, and dividing by 12 and moving it to the bank account just makes me look more bankable.
GalaxyBoy
Thinks s/he gets paid by the post
+1 for my trad inherited IRA.
I'm also taking the equity out of an inherited annuity over five years to spread out the tax burden, and I have three withdrawals left. The underlying investment in that account is a stock index fund (the cheapest option and the only choice of an index fund available and it's still a 0.28% ER
). It appreciated quite a bit last year leaving me thinking I would have been better off to have gone ahead and taken that money out earlier in the year and reinvested it in a taxable account where the income on the gain is taxed at capital gains rates. But if/when the market drops the opposite would be true.Oh, modern life's problems!
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