RMD Withdrawal

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RMD Withdrawal

Postby OldOne » Thu Aug 04, 2011 10:35 pm

Got to start taking RMD's and am wondering if it matters as to which funds to take the money. I currently have these funds in my IRA - All Vanguard funds

High Yield Corporate VWEHX
Short Term Investment Grade VFSTX
Primecap VPMCX
Total International Stock VTIAX
Total Bond VBTLX
Total Stock VTSAX
Inflation Protected VAIPX

I've instructed Vanguard to take the RMD equally from the above funds, at the end of the year. For the time being, Vanguard will put the money into my taxable MM account VMMXX.

Is that OK or should I do things differently and save a few dollars?
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Postby joe8d » Thu Aug 04, 2011 10:52 pm

Are you going to be spending the money or just bringing it out from TD status to a taxable status? One thing, for sure,I would do is leave the TIPS fund untouched as long as possible.
Last edited by joe8d on Thu Aug 04, 2011 10:53 pm, edited 1 time in total.
All the Best, | Joe
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Re: RMD Withdrawal

Postby Mel Lindauer » Thu Aug 04, 2011 10:52 pm

OldOne wrote:Got to start taking RMD's and am wondering if it matters as to which funds to take the money. I currently have these funds in my IRA - All Vanguard funds

High Yield Corporate VWEHX
Short Term Investment Grade VFSTX
Primecap VPMCX
Total International Stock VTIAX
Total Bond VBTLX
Total Stock VTSAX
Inflation Protected VAIPX

I've instructed Vanguard to take the RMD equally from the above funds, at the end of the year. For the time being, Vanguard will put the money into my taxable MM account VMMXX.

Is that OK or should I do things differently and save a few dollars?


Your RMD can be used as a good rebalancing tool. Take your withdrawals from the fund(s) that you need to trim in order to meet your desired asset allocation.
Best Regards - Mel | | Semper Fi
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Postby CABob » Thu Aug 04, 2011 11:07 pm

Your RMD can be used as a good rebalancing tool. Take your withdrawals from the fund(s) that you need to trim in order to meet your desired asset allocation.

Or, if your funds are allocated the way you want them you could have Vanguard take RMD from all funds in proportion to their size. This is perhaps what you meant when you said they would take from all funds equally. This would leave your portfolio balanced. That is what I did last year and had the money put into a taxable money market fund. I haven't decided what I will do this year.
It also may depend on what you plan to do with the withdrawal. If you plan to use the money for expenses putting it into a money market account or fund probably makes the most sense. If you plan to reinvest all or a portion of the withdrawal into a taxable account you may want to give more thought to the process.
Personally, I prefer to keep the withdrawal separate from rebalancing.
Bob | An investment in knowledge pays the best interest. -- Benjamin Franklin
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Postby Alan S. » Fri Aug 05, 2011 12:38 am

If you don't need to re balance and do not need the cash for living expenses you can take the RMD "in kind" by just transferring the shares out of your IRA into the taxable account. The cost basis in the taxable account will be the value of the respective fund at distribution from the IRA.

Of course, if you want to do this you also have to consider if holding the respective shares in a taxable account is appropriate or not. You can also "mix and match" with a distribution of certain of the shares and cash for the remainder of the RMD. You can also "aggregate" your RMD if you have more than one TIRA account, ie you can satisfy the RMD for both by taking distributions from only one of the IRAs.
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Thanks

Postby OldOne » Fri Aug 05, 2011 4:38 pm

I appreciate all the advice and will take a closer look at this RMD withdrawal and give it more respect. To clear up something, the RMD was taken by percentage of each of those funds in my IRA. Maybe that's not the best way but it was the easy way out. So, I took a closer look at the RMD at my account (opened my account today with gritted teeth and YIKES!) and will take more care with the withdrawals. Many Thanks to you Joe, Mel, Bob & Alan. And thanks to this web site as there's nothing comparable on the WWW.
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