RMD Folks how are you using the money

[street]

I have some years left before I'm required to take MRD. My question is to you folks that are getting them now are you reinvesting, spending it and what have you been doing with these large sums of money?

 

[braumeister]

The RMD amounts to about a third of our withdrawal for the year, so it just gets spent.

 

[Andre1969]

I'm still a ways off from my own RMD, at 70.5, as I'm only 48. I might start tapping those funds a little early though, once the time gets closer, if it might be tax advantageous to do so.

However, I have two inherited IRAs...the first from my grandmother, who passed away in 2015, and the second from my Dad, who passed away in 2017. So far, the withdrawals have been small. I think for Grandmom's, it was around $126 in 2016, $88 in 2017, and $117 in 2018. It's in a somewhat aggressive/volatile fund, and only started off with around $4800, so that's why it's fluctuated so much. I've just been depositing these into my checking account and they get spent, invested, or whatever with the rest of that money.

The second IRA, from my Dad, was a bit more sizeable, around $66K. The first RMD was around $1800 this year. I didn't need it, so I put it in a money market account that I'm currently using, to save up for the down payment on a house. I think the APR on it is about 1.66% annually. I figured I'd keep this conservative, since I might need the money in a few years.

 

[Sunset]

We are not yet requited to take RMD's, but to lessen the tax torpedo effect of RMD + SS + regular divs/capital gains.
We are taking some $$$ from IRA while we are low income.
Some IRA we directly convert to ROTH, and some is simply withdrawn.

 

[akck]

My wife has a beneficiary IRA and the RMDs are used for our expenses. However, in our minds, we assume they are utilized for travel. When our other IRAs have RMDs, we’ll likely have excess income that will be transferred to a taxable account, which if my projections are correct, will become our biggest asset account.

 

[daylatedollarshort]

We aren't taking RMDs yet but when we start my plan has to reinvest the distributions and DH's plan is to buy a Lexus, but that is a ways off so for us so we can decide at the time.

 

[kgtest]

We are not yet requited to take RMD's, but to lessen the tax torpedo effect of RMD + SS + regular divs/capital gains.
We are taking some $$$ from IRA while we are low income.
Some IRA we directly convert to ROTH, and some is simply withdrawn.

You could contribute to a 529 of someone you know and take a tax deduction.

You can gift to family.

My question is, what would you want to do with it. Spend, or re-invest?

 

[Accidental Retiree]

Our current plan for RMDs is to have ETF shares transferred in kind to our brokerage account, so we will be “reinvesting.”

We may withhold part of the RMDs for paying taxes, too.

 

[athena53]

I have 5 years to go but, assuming that it's still permissible, an amount equal to my church pledge will be donated directly, thus keeping that amount out of my AGI. While it's true that I'll no longer be able to deduct that donation and thus won't be able to itemize, the standard deduction will mitigate a lot of that loss.

A lot can change with the tax laws in 5 years, of course.

 

[NYEXPAT]

Should probably change the title, I am only in here cause I thought it was about MARRIED folks.

 

[Sue J]

RMD Folk's how are you using the money

2017 was the first year for an RMD from my inherited IRA. It was around $2500 and I used it to replace our 26 year old manual Sunsetter Awning with a new motorized one. It’s wonderful! My dad always loved our deck and awning and I think of him often when I press the button on the remote.

This year the RMD is around $2750 (yay for growth!). So far no specific plans for the money.

 

[REWahoo]

We are into our second year of RMDs and the amounts are roughly equal to what we were already withdrawing. So to answer your question, we are spending it.

 

[braumeister]

my plan is to reinvest the distributions and DH's plan is to buy a Lexus,

A Lexus isn't an investment?

 

[misanman]

We draw $4000/mo as "salary", use QCDs twice a year for charitable giving, and this year the rest was spent towards a new vehicle.

 

[MissMolly]

Currently only drawing on an inherited IRA. RMDs are ~$4,000 which I just have transferred into the taxable account. My plan, by the time we reach 70, (which starts in 4 years) is to continue to have the RMDs transferred into the taxable account. Between pension and SS we should have enough to cover all expenses, unless we get crazy wild. But it will be there if we need it.

 

[GalaxyBoy]

Inherited RMD with a fairly small distribution, on the order of a few thousand dollars. I consider the money fungible, and it gets thrown in with everything else in the taxable account at rebalancing time. That, and I have a non-qualified inherited annuity from which I'm taking withdrawals over a five year period to minimize the tax hit.

 

[Car-Guy]

A Lexus isn't an investment?

I'm not a Lexus fan but you just never know.

https://www.usatoday.com/story/money/2018/04/22/collector-cars/535553002/

 

[mickeyd]

I reinvest part of it back into the same fund but in our joint account (usually TSM). Another part goes into PMMF to blow on top shelf liquor and craft beer throughout the year.

 

[foxfirev5]

Projecting the account balance, guessing that my RMD with be somewhat larger (or more) than my current WD. Not a huge amount so maybe I'll pull a little more for the next few years. I plan to run the taxes with the current assumptions plus a healthy dose of future increases to justify my actions.

 

[foxfirev5]

A Lexus isn't an investment?

DW's 13 year old Lexus is slowly turning from a whim into a solid wise expense choice. Making the leap to an investment would require some extraordinary circumstances.

 

[sanfanciscotreat]

Re comment no. 7, can you get a tax deduction for contributing to a 529 account?

 

[Souschef]

Since to put it bluntly, I have more $ in my IRA than I can spend, I give a gift to all 4 of our sons on their birthday, I make some QCD's to a number of organizations, and I am taking a cruise to Hawaii on the rest

 

[Hermit]

I start RMDs in 2 years. All my retirement investments are in IRAs. I should be able to live entirely on SS and pension and I will probably be banking some of that. Almost all of the first three years' RMDs are committed to QCD to my favorite charity. I think the bulk of the following 7 years will also go to the charity. If I take much at all in RMDs, taxes and Medicare premiums start hitting me pretty hard. After the first 10 years, I will reevaluate with estate planning in mind.

That was my LBYM side.

On the "Spend that Dough" side, I may decide to buy a pickup, camper, and ATV and take the tax and Medicare premiums hit for a year. If I do that, it will probably be before RMDs kick in.

 

[Nature Lover]

I have inherited IRAs from which I receive modest RMDs. The funds are reallocated to a growing cash stash, or reinvested at the brokerage. Pensions and other income pay for ongoing expenses. I'm 57, so age based RMDs still a ways away.

 

[meierlde]

Re comment no. 7, can you get a tax deduction for contributing to a 529 account?

In some states such as Colorado you can get a state income tax deduction by contributing to their 529 plan and in a few states to any 529 plan you can get a state income tax deduction. No federal deduction however.