Strategy for taking RMDs

Which way of taking your RMD do you think is the best for you?

  1. Take the full RMD out early in the January and don’t worry about it for the rest of the year.

  2. Take the RMD out over a period of time - dollar cost averaging.

  3. Market timing waiting for the right moment or moments to take the RMD.

  4. Taking the RMD out at the end of December.

Answering my own question:
We go for option1 with a twist. We move out the full amount due in the first week of the year, but leave some of it in the tax deferred sweep account to fund qualified charitable donations. When our QCDs are done we move it over to our regular savings account.

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I take it early in January and don’t worry about it after that.

Just move it to the checking account and live on it for the year as SS keeps it topped up.

Do a Roth conversion mid-year usually from Neurospouse’s IRA. Since I am materially older and not yet of RMD age, I expect that one day she will be filing single, so reducing her expected RMD is presumed to be beneficial.

Use the Roths to manage tax bracket for filing if some extra expenses arise.

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I manage my mother’s finances, I opt to take out the RMD the first day of the year possible. Main reason, get it done and you know what you have and have left. Second reason (sounds a little macabre), get it done before a potential death makes for less IRS paperwork to handle.

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We take it monthly and deduct 20% for the tax man. Along about Oct or Nov we ask for an additional $5K be given to the tax man. I know this goes against all financial thought but years ago I had to pay the tax man and I swore that would never happen again. We always get a sizeable refund and that’s fine with us.

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Mine is a slight variation of that; the investment firm we use allows us to automatically take the RMD when we want to, so we do it on December 15th each year. Because it’s automated, I don’t have to worry about it.

Federal and state taxes are automatically calculated and sent to the authorities and the balance goes into our after-tax joint account to be invested. I’ve been retired 3.5 years and, so far, we haven’t needed our RMD. Yes, I wish I put more into our Roth’s when I was younger. Good news is I’ve drilled that into my kid’s heads.

Why pay Uncle Sam in January when I can pay him in December?

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Too young to have RMDs, but we do need income from our retirement accounts. The account we are primarily using is a traditional IRA at a brokerage, with 2 equity funds, a bond fund and money market. We aim for about 70% equity, 25% bond and 5% money market. Interest and Dividends are not reinvested, but go into the money market sweep. We take distributions from it monthly, but there is always enough in the money market to fund the distributions. A couple of times a year, a small portion of the equity and bond funds are sold at what appear to be good times in order to build the money market position and re-balance our allocations among the funds. So, of your options it is kind of a hybrid of 2 and 3, I guess.

By taking the distributions monthly, we can still make some adjustments at the end of the year for tax purposes, but have income throughout the year. We have federal and state taxes withheld from the distributions, so we don’t have to deal with estimated tax payments, which means we typically have a refund in the spring.

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My reasoning is that since the RMD amount is based on the tax deferred account’s closing balance on December 31, I want to take my RMD as close as I can to that date to avoid being caught in a down year.

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Best time is when your investment value is lowest. Then you move more shares out of the IRA and reduce future RMDs.

If in equities, January is best if you think stocks will increase this year.

I have mine taken out quarterly. First one based on last years tax return. But adjusted each quarter for actual capital gains. I also use these funds to pay income taxes and have 47% sent to taxes. That reduces estimated taxes sometimes to zero or even nice refund.

Fidelity does this for me but you have to watch it. They will pay automatically from mutual funds in the account but not if sale of equities is required. So need to check end of year to make sure you made full RMD amount.

Once taxes are taken out the remainder goes to my taxable investment account and usually gets reinvested within a month.

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You are paying Uncle Sam in January. (4Q Estimated tax payment due Jan 15th of the following year.) {{ LOL }}

I still have 5 years before my first RMD, but my plan is the same
(i.e., take the RMD in December, and make the 4Q Est tax payment the following January.)

intercst

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Why not just have the tax withheld? Works for me, for both federal and state.

Steve

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