[bob47]

2022 required minimum distributions for IRAs got locked in at the end of 2021 when markets were high. It's not hard to imagine markets will still be lower at the end of 2022. Are there any suggested strategies in this situation to prepare for the distribution? Maybe in kind distributions from the IRA to the brokerage account is the best strategy?

[retiredguy123]

Originally Posted by bob47

2022 required minimum distributions for IRAs got locked in at the end of 2021 when markets were high. It's not hard to imagine markets will still be lower at the end of 2022. Are there any suggested strategies in this situation to prepare for the distribution? Maybe in kind distributions from the IRA to the brokerage account is the best strategy?

You can always withdraw the RMD and use the money to purchase the same or similar investments in a non-retirement account. But, you will still need to pay income tax on the RMD amount that you withdrew. One way to avoid the income tax on the RMD would be to do a direct transfer to a charity.

[Altavia]

Other side - Unlikely taxes will be any lower than today.

[davem4616]

the following year your RMD will be lower due to the market decline...so maybe between the two years your RMD's will even out if the tax bracket stays the same for you

you're going to have to take the RMD...what you do with the money once Uncle Sam get's his cut is up to you

the comment about the charity might be a way to dodge the tax...but I'd check with your tax advisor to make sure that applies even if you do or don't itemize...the tax rules seem to change from year to year...

[Boomer]

You are asking a question that I bet a lot of people are going to have at the end of the year. You have just thought of it sooner.

If the market is down in December, and if you do not have enough cash inside IRAs to protect stocks from having to be sold to pay the RMD, that would not be ideal, of course.

I would ask an accountant about whether an “in kind” transfer would be a way to pay the RMD based on the amount of the face value of the stocks transferring. (If you can do in-kind.) But later if you want to sell the in-kind shares, I have a feeling they come in dragging their cost basis with them, thus invoking a cap gain tax. Possibly a biggun. You should find out about that.

Dividend investors can let some of that income accumulate in cash inside the IRA and then use it for the RMD when the time comes, so they don’t have to sell stocks to pay taxes. That cash is like a moat around the stocks to protect them from having to be sold or transferred out to a taxable account.

(If you are charitably inclined anyway, look into using a QCD for part of the RMD. The advantage of the QCD is that it is not added into the AGI. But it would not help you keep your stocks. It would just save some income tax.)

Sounds like you are in “Be Prepared” mode. What you are talking about here (in May) will probably sneak up on some people in December.

Get professional advice and good luck with finding the most effective thing to do. (And maybe think about building that moat of cash inside an IRA. Even though the ROI on cash is absurd, your stocks would be protected.)

You probably already know that if you have more than one traditional IRA, the total RMD from all of them can be paid out of just one of the accounts. (Check me on that one, too. But, so far, I am not writing these posts from tax jail.)

Boomer

[LuvtheVillages]

Originally Posted by davem4616

the comment about the charity might be a way to dodge the tax...but I'd check with your tax advisor to make sure that applies even if you do or don't itemize...the tax rules seem to change from year to year...

It does not matter whether you itemize or not. When you donate a Qualified Charitable Distribution, it counts toward your RMD, and does not count as income to you.

Be sure that the funds go directly from your retirement account to the charity. You must not receive the funds. Simply call your charity and let them know that the funds are on the way. If you donate regularly, (perhaps to your church or temple) you can satisfy your annual tithe this way.

[villagetinker]

Interesting discussion, if you can take a loss against an RMD, I will need to discuss with financial advisor and tax expert. I do not have a clue.

[Babubhat]

A planning device often not used for maximum efficiency

[retiredguy123]

Originally Posted by Boomer

You are asking a question that I bet a lot of people are going to have at the end of the year. You have just thought of it sooner.

If the market is down in December, and if you do not have enough cash inside IRAs to protect stocks from having to be sold to pay the RMD, that would not be ideal, of course.

I would ask an accountant about whether an “in kind” transfer would be a way to pay the RMD based on the amount of the face value of the stocks transferring. (If you can do in-kind.) But later if you want to sell the in-kind shares, I have a feeling they come in dragging their cost basis with them, thus invoking a cap gain tax. Possibly a biggun. You should find out about that.

Dividend investors can let some of that income accumulate in cash inside the IRA and then use it for the RMD when the time comes, so they don’t have to sell stocks to pay taxes. That cash is like a moat around the stocks to protect them from having to be sold or transferred out to a taxable account.

(If you are charitably inclined anyway, look into using a QCD for part of the RMD. The advantage of the QCD is that it is not added into the AGI. But it would not help you keep your stocks. It would just save some income tax.)

Sounds like you are in “Be Prepared” mode. What you are talking about here (in May) will probably sneak up on some people in December.

Get professional advice and good luck with finding the most effective thing to do. (And maybe think about building that moat of cash inside an IRA. Even though the ROI on cash is absurd, your stocks would be protected.)

You probably already know that if you have more than one traditional IRA, the total RMD from all of them can be paid out of just one of the accounts. (Check me on that one, too. But, so far, I am not writing these posts from tax jail.)

Boomer

All earnings from an IRA are taxed as ordinary income. So, it doesn't matter whether you have capital gains or not. Capital gains inside an IRA do not count as capital gains. I was just suggesting that, if you want to keep the same type of stocks, you can replicate them by buying the same stocks with the RMD money. But, any stocks you purchase outside of the IRA, will have a new tax basis, even if they are the same stocks you had inside the IRA. There is no tax benefit by buying "in kind" stocks with the RMD money. The RMD money will be immediately taxed as ordinary income regardless, and you cannot defer it.

[villagetinker]

Retiredguy123, good point, I was not really thinking about that, Oh well..........

[Stu from NYC]

Originally Posted by retiredguy123

All earnings from an IRA are taxed as ordinary income. So, it doesn't matter whether you have capital gains or not. Capital gains inside an IRA do not count as capital gains. I was just suggesting that, if you want to keep the same type of stocks, you can replicate them by buying the same stocks with the RMD money. But, any stocks you purchase outside of the IRA, will have a new tax basis, even if they are the same stocks you had inside the IRA. There is no tax benefit by buying "in kind" stocks with the RMD money. The RMD money will be immediately taxed as ordinary income regardless, and you cannot defer it.

Very true we signed up to pay taxes on the money invested in the IRA or 401 from the getgo.

[CoachKandSportsguy]

Your RMD is calculated, you can take it out at any time, you can change the date to tomorrow if you want.Taking it out when the market is higher is a better strategy, because as the account falls in size, then you are taking out a larger percentage of the total value. (I mentioned this point in a prior post as it would suck for many people if the market fell 50% before you took your RMD based on the highest value at the end of last year.)

The second question is after you pay your taxes, investing the remaining RMD back into productive investments will help continue to grow your taxable assets, which have a different tax basis with long term gains and tax free dividends, up to a limit. With a large account and significant RMD, pay your taxes, you were successful, and try to avoid drawing down any taxable account assets, and you will have a nice rainy day or travel fund to draw on if necessary. Or, gift the money away now to family members who can use the extra money more than you can at this point.

We don't know your whole financial portfolio and lifestyle needs. I manage my parent's estates and trusts, and I took the RMD and invested into continue to grow their estate for now private pay dementia facility, which my mom likes and is very close to us. She has
20 years of private pay facility costs in her taxable estate, which I have not touched as the IRAs are paying for it with large medical expense deductions for zero taxes paid on the IRA income. She is 95 so I doubt she will use it all. .

good luck

[bowlingal]

you can take your RMD and just put it into another bank account. you don't have to spend it

[billthecpa]

Someone posted that ....."All earnings from an IRA are taxed as ordinary income."
This is not true. Earnings accumulate TAX FREE in an IRA.....and it is DISTRIBUTIONS from the IRA to the owner that are taxable.

[retiredguy123]

Originally Posted by billthecpa

Someone posted that ....."All earnings from an IRA are taxed as ordinary income."
This is not true. Earnings accumulate TAX FREE in an IRA.....and it is DISTRIBUTIONS from the IRA to the owner that are taxable.

Correct, but the thread is about RMDs, which are distributions.