RMD-- Is this the time to take it?

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Because I've put a lot of 457 money into an IRA, I have too much money in there and am taking it in the neck on income taxes. I've been putting about ten grand a year from my regular IRA into my Roth after making the RMD, but a normal projected RMD shows my almost doubling my RMD as accounts appreciate and I get older with less time to clean it out.

Under normal circumstances I would think this is the worst time possible to be even looking at my accounts, I have no desire to invest new money in this market. Tried to catch enough falling knives in my younger years.

However, if I took my RMD now and moved it into my regular accounts and added some additional money from my regular IRA into my Roth on top of that, I would, at least be getting more shares out of my IRA now. Same (required) money out of my IRA and into my regular account and Roth now would mean fewer shares and lower RMD payments in the future. If I traded depreciating index funds in my IRA for similar depreciating index funds in my regular accounts and Roth, I wouldn't really be trying to time the market because the underlying investments would be the same. I'd just be moving more money out of my regular IRA and lessening my future payments to Uncle Sam in exchange for no-tax Roths or capital gains regular accounts.

Does this make sense? Or.....
 
If you don't take the Required Minimum Distribution you will, indeed, take it in the neck on punitive taxes. So, that should not even be in question. When you take money out of a traditional IRA you create a taxable event. You have to pay taxes on that money and I don't know any way to avoid that. If you put that into a Roth the advantage is you don't have to pay taxes on the money when you take it out. My question is: why don't you just enjoy the money, buy a car, eat out more, go on a vacation?? If you don't have any real use for the money now, put in in a regular trading account. If you don't want to take any risk with the money in your trading account, put it in short term treasury bond funds.
 
I'm comfortable with my life style and investing mix. You can't throw it into a Roth until the RMD is taken. I just wondered if using depressed prices to maximize shares sold (not money, that's fixed) would minimize future tax liability if total investment balance doesn't change.
 
It's funny....I have the same question as the OP....is it better to move $$ from a 457 (which tax is owed on) to a ROTH 401 (going into the exact same funds) now...and take the (approx.) 28% tax hit now (when fund prices have dropped)...or does it matter whether fund prices are high or low? With the younger population desiring socialism...I don't see tax rates going lower in the future....somebody has to pay for all that 'free stuff'?
 
If you are in to RMD time and the RMD is not only affecting your tax bracket but your SS by kicking you into the 85% crowd and your Medicare penalties you might just want to take a 1 year kick in the *** by the Fed and move it all to a Roth. If the market keeps falling you will lose a bit when selling but you can buy the same stuff back at a discount 2 days later.
 
Sounds like you need to talk to a financial advisor, not folks on a forum.
 
Originally Posted by pbm
It's funny....I have the same question as the OP....is it better to move $$ from a 457 (which tax is owed on) to a ROTH 401 (going into the exact same funds) now...and take the (approx.) 28% tax hit now (when fund prices have dropped)...or does it matter whether fund prices are high or low? With the younger population desiring socialism...I don't see tax rates going lower in the future....somebody has to pay for all that 'free stuff'?

Flee from a 457 as quickly as you can. I was a governmental CEO and even I couldn't figure out all the hidden fees. Many more than in a 401k, and far less competition.
 
Originally Posted by Bud
Sounds like you need to talk to a financial advisor, not folks on a forum.

I'm crowd sourcing. I've had universal negative experience with people purporting to be financial managers although i have eaten some of their free meals. i did pose this question to the manager of my brokerage and may kick it up to Bogleheads.
 
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Originally Posted by samven
If you are in to RMD time and the RMD is not only affecting your tax bracket but your SS by kicking you into the 85% crowd and your Medicare penalties you might just want to take a 1 year kick in the *** by the Fed and move it all to a Roth. If the market keeps falling you will lose a bit when selling but you can buy the same stuff back at a discount 2 days later.

Good point. Run through the fire pit as quickly as possible. I have near identical index products on both sides of the line. The difference in a Vanguard and a Schwab index will get you a ham sandwich after a decade.
 
Originally Posted by csandste
Originally Posted by Bud
Sounds like you need to talk to a financial advisor, not folks on a forum.

I'm crowd sourcing. I've had universal negative experience with people purporting to be financial managers although i have eaten some of their free meals. i did pose this question to the manager of my brokerage and may kick it up to Bogleheads.

I have spoken to a few FA....they seem to push converting to a ROTH and buying whole life insurance...and charge a hefty fee for doing it for you...
 
Originally Posted by csandste


However, if I took my RMD now and moved it into my regular accounts and added some additional money from my regular IRA into my Roth on top of that,

"I would, at least be getting more shares out of my IRA now."

Same (required) money out of my IRA and into my regular account and Roth now would mean fewer shares and lower RMD payments in the future. If I traded depreciating index funds in my IRA for similar depreciating index funds in my regular accounts and Roth, I wouldn't really be trying to time the market because the underlying investments would be the same. I'd just be moving more money out of my regular IRA and lessening my future payments to Uncle Sam in exchange for no-tax Roths or capital gains regular accounts.

Does this make sense? Or.....


I'm with others that suggest guidance from your accountant at minimal, but sounds like you have enough money to need professional financial adviser advice. As you know, you must be of age to be required to take an RMD, should be 70 1/2 I believe. Its hard enough getting anyone to agree on 0w20 vs 5w20 vs 5w30, let alone brands or what color jugs are the best. lol, that sounded so dirty...

I'm only going to pick on the sentence that I put in quotations. Your retirement acct RMD is only based upon a dollar value amount, and your estimated life expectancy, not amount of shares. Your objective should be to keep as many shares as possible, and receive the highest possible price for your shares, but as we see looking in the rear view mirror that time was week before last, and will probably not be back to that level till after the elections if # 45 is re elected. I would strongly suggest you wait for even a "Dead cat bounce" which will happen in a few days if you wish.

This may very well be the pre election correction that has come very early, but has something to blame for the timing, then again, we maybe in for a world wide recession and another 10% down at some point before November. No one has a crystal ball, I wish we did!
 
I wonder if you'd get better responses over on bogleheads forum? At least over there they're dedicated to money matters.

I'm decades from worrying about RMD's so I don't know how they "work". But could you just take the money out, leave in a bank account for now, wait until the economy bottoms out, then just invest in an index fund? Or invest however you see fit today? I mean, you only have to take it out, you don't actually have to spend it, right? Any growth becomes taxable etc, but you don't have to set it on fire either.
 
Originally Posted by supton
I wonder if you'd get better responses over on bogleheads forum? At least over there they're dedicated to money matters.

I'm decades from worrying about RMD's so I don't know how they "work". But could you just take the money out, leave in a bank account for now, wait until the economy bottoms out, then just invest in an index fund? Or invest however you see fit today? I mean, you only have to take it out, you don't actually have to spend it, right? Any growth becomes taxable etc, but you don't have to set it on fire either.

As Jack Bogle said, never try to time the market. I'm very conservstively invested as of 2018, I intend to not change my investment profile, simply trying to shift it out of my regular IRA. My advice to younger people is to take a 401k up to the match, maximize any Roth and pay capital gains on other investments. My taxes have tripled since retirement cause I deferred half my income. Of course who knows what the tax code will be in twenty years.
 
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Originally Posted by Mr Nice
Take it and enjoy the money.

If you're retired enjoy a vacation to ___ .

I take lots of vacations. Love cruise ships, although being quarantined on one until I'm exposed might change my plans in the near term (which might be my only term).
 
"Your objective should be to keep as many shares as possible,"

No, my objective should be to have as few shares left as possible (for the same RMD+ additional shift to Roth) in my regular IRA, and as many shares as possible in my regular account and IRA. The dollars are fixed and determined by law, I have to take the RMD. Of course this means timing the market. I'm better off burning 50 shares at $20, then I am 20 shares at $50, but I'd be even better if I burned 100 shares at $10.

This means timing the market, which goes against my Bogleite beliefs. I'm beginning to think this is a mirror of dollar cost averaging but unlike DCA during the accumulation phase this is tied a very specific time limited horizon.

I will post this question on Bogleheads if it hasn't been done all ready. This is an "Off Broadway" attempt to get public feedback before I hit the big time.

As far as financial advisers. I have a girlfriend who doesn't trust her investing instincts. Each of her attempts at getting expert advice has resulted on her getting burned by scammers.
 
Originally Posted by csandste
Originally Posted by supton
I wonder if you'd get better responses over on bogleheads forum? At least over there they're dedicated to money matters.

I'm decades from worrying about RMD's so I don't know how they "work". But could you just take the money out, leave in a bank account for now, wait until the economy bottoms out, then just invest in an index fund? Or invest however you see fit today? I mean, you only have to take it out, you don't actually have to spend it, right? Any growth becomes taxable etc, but you don't have to set it on fire either.

As Jack Bogle said, never try to time the market. I'm very conservstively invested as of 2018, I intend to not change my investment profile, simply trying to shift it out of my regular IRA. My advice to younger people is to take a 401k up to the match, maximize any Roth and pay capital gains on other investments. My taxes have tripled since retirement cause I deferred half my income. Of course who knows what the tax code will be in twenty years.

Sure. But you indicated that you had to take money out of the market (the minimum distribution) and it sounded like you didn't want to. I was pointing out that you could pull it out and sit on it. Or invest if you felt like it. For anyone else I'd advise to leave alone and ride out the storm--but you're not like everyone else, you're being "forced" into taking money out.
 
In the context of the strategy mentioned, take the minimum and convert it to a roth IRA while prices are low would make sense. It's basically a wash.

I have a relative that basically has Fidelity calculating what the minimum should be and automatically sending them a check at the end of the year. That way you get the full returns for the year.
 
The theme I get from reading this thread is that the OP will die and leave a lot of money to his heirs and is most concerned with maximizing their inheritance. Am i wrong?

Let a pro handle your money and live what's left of your and your g/f's life to the fullest.
 
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