Required Withdrawals Question

[FloridaJim57]

I read someplace (and darned if I can't remember where) that if a person were to restrict their IRA withdrawals to the required withdrawal amount each year, they would never run out of money in their IRA. Thoughts on this?

 

[audreyh1]

The way the IRS tables are set up the % withdrawn increases with age (not exceeding 20% until age 104) but because you are are never required to draw 100% on a non-inherited IRA you might keep taking increasing percentages of a dwindling amount but it won’t actually run out.

 

[COcheesehead]

Kind of like why the NFL penalizes teams half the distance to the goal inside the 20 yard line.

 

[Mark1]

Kind of like why the NFL penalizes teams half the distance to the goal inside the 20 yard line.

Nice analogy.

 

[pb4uski]

I read someplace (and darned if I can't remember where) that if a person were to restrict their IRA withdrawals to the required withdrawal amount each year, they would never run out of money in their IRA. Thoughts on this?

That is true mathematically, but the rub would be that the RMD might not be enough to live on.

Let's say that your tIRA is $1m and are 74... the divisor is 23.8 so your RMD would be $42,016.

Let's say that the following year because of horrible investment results that you balance is now $100,000 and you are 75... the divisor is 22.9 so your RMD would be $4,367.

The value is always measured on your value on January 1.

 

[NW-Bound]

If anything, the IRS longevity table is way too optimistic. It goes all the way to 115 years of age.

At 72, you are required to withdraw about 4% of your account balance.

At 90, you are required to withdraw 8.8%.

We do not have any poster here above 90. We had a couple of posters above 80, I think, but they did not make it to 90.

Nope, one does not run out of money using the IRS RMD. No way.

 

[NW-Bound]

That is true mathematically, but the rub would be that the RMD might not be enough to live on.

Let's say that your tIRA is $1m and are 74... the divisor is 23.8 so your RMD would be $42,016.

Let's say that the following year because of horrible investment results that you balance is now $100,000 and you are 75... the divisor is 22.9 so your RMD would be $4,367.

The value is always measured on your value on January 1.

If your balance goes from $1M to $100K in a year, you may just succumb to a heart attack, and no longer have to worry about RMD.

 

[ejman]

If anything, the IRS longevity table is way too optimistic. It goes all the way to 115 years of age.

At 72, you are required to withdraw about 4% of your account balance.

At 90, you are required to withdraw 8.8%.

We do not have any poster here above 90. We had a couple of posters above 80, I think, but they did not make it to 90.

Nope, one does not run out of money using the IRS RMD. No way.

Well, maybe there will be someone that decides to start posting @ early-retirement.org at age 90+. You know what kids are like nowadays

 

[RunningBum]

I read someplace (and darned if I can't remember where) that if a person were to restrict their IRA withdrawals to the required withdrawal amount each year, they would never run out of money in their IRA. Thoughts on this?

That's not hard to prove when you look at the RMD table and see that you are never required to take out 100% of your balance. Even at age 115 and above you barely have to take out more than half.

But, is this supposed to be a good thing? I suppose if your heirs are going to be in a lower tax bracket it might be desirable. Otherwise, I don't mind paying the tax since it lets me spend that money.

 

[RunningBum]

Well, maybe there will be someone that decides to start posting @ early-retirement.org at age 90+. You know what kids are like nowadays

Go over to Bogleheads and recruit Taylor Larimore. I believe he's 97 and still a frequent poster.

 

[oldtimer]

That's not hard to prove when you look at the RMD table and see that you are never required to take out 100% of your balance. Even at age 115 and above you barely have to take out more than half.

Actually if your balance was higher last Dec 31 and you waited to take this year's RMD $ amount, the % of your portfolio you have to withdraw is higher now than it was on Jan 3rd (RMD %).

 

[Badger]

I read someplace (and darned if I can't remember where) that if a person were to restrict their IRA withdrawals to the required withdrawal amount each year, they would never run out of money in their IRA. Thoughts on this?

That sounds similar (but not quite) to Zeno's arrow paradox.

Cheers!

 

[FLSUnFIRE]

Not quite RMD but same tables/logic; I will use the minimum distribution method for my SEPP as it will increase my withdrawals as my balance grows/I age (and adjust down if the market tanks). I'll never run out but the downside will be that I'll lose some control over my income/realized taxable income from initiation until 59.5 at which point I'll reevaluate whether to continue until RMD kicks in or continue to fund my expenses.


As PB4USKI said, you won't run out but the RMD amount may not cover expenses. Of course, if RMD ramps up higher than your expenses and the account is your only source of income, it would be prudent to save/reinvest some of it so you have funds in following years. The RMD is about the gov't getting to tax your deferred funds, you don't have to spend it! Safe withdrawal rate still applies...

 

[Dtail]

If anything, the IRS longevity table is way too optimistic. It goes all the way to 115 years of age.

At 72, you are required to withdraw about 4% of your account balance.

At 90, you are required to withdraw 8.8%.

We do not have any poster here above 90. We had a couple of posters above 80, I think, but they did not make it to 90.

Nope, one does not run out of money using the IRS RMD. No way.

Well let's hope @Souschef gets to 90+.

 

[Souschef]

Well let's hope @Souschef gets to 90+.

From your lips.....
My dad died at 92, and mom died at 102. Taking the average, I am figuring 97

 

[Dash man]

From your lips.....
My dad died at 92, and mom died at 102. Taking the average, I am figuring 97

Hmmm…if I take the average of 61 (mom) and 72 (dad), I’m in trouble at 66! [emoji15]

 

[Bamaman]

I've got between now and the end of the year to make my first RMD--based on the 12/31/2012 outstanding balance of my accounts.

And with the market bombing, I'm not a happy camper. But I'm far ahead of what I started with in 1972.

I'm just thankful to have made it 14 years in ER without having to make any withdrawals.

 

[Sunset]

I've got between now and the end of the year to make my first RMD--based on the 12/31/2012 outstanding balance of my accounts.

And with the market bombing, I'm not a happy camper. But I'm far ahead of what I started with in 1972.

I'm just thankful to have made it 14 years in ER without having to make any withdrawals.

You can take it out , and immediately buy whatever it was in. So in effect its just a transfer from account to account.
Of course if it was in a BND fund, I'd buy Treasuries instead or I-bonds.

 

[audreyh1]

If I didn’t already have the cash in my IRA to cover the RMD withdrawal, I would simply transfer some of the assets in kind.

 

[youbet]

I've got between now and the end of the year to make my first RMD--based on the 12/31/2012 outstanding balance of my accounts.

.

Are you sure about that date?

 

[youbet]

If I didn’t already have the cash in my IRA to cover the RMD withdrawal, I would simply transfer some of the assets in kind.

+1

 

[NW-Bound]

Hmmm…if I take the average of 61 (mom) and 72 (dad), I’m in trouble at 66! [emoji15]

No, you are supposed to add the numbers.

 

[NW-Bound]

And with the market bombing, I'm not a happy camper. But I'm far ahead of what I started with in 1972...

We all hope to have something to show after a few decades of working.

 

[Chuckanut]

I have several non-Roth IRA accounts. Can I take the total reqtuired RMD amount from only one account? Or do I have to take the RMD percentage from each account?

 

[Souschef]

I have several non-Roth IRA accounts. Can I take the total reqtuired RMD amount from only one account? Or do I have to take the RMD percentage from each account?

You can take it from one account or several, as long as the total adds up to your RMD. In my case, I have 2 accounts, and take part out of each one.