Is it safe to assume that RMDs won't deplete one's portfolio?

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Ben Mathew
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by Ben Mathew »

grok87 wrote: Thu Jun 01, 2023 7:16 am
Ben Mathew wrote: Wed May 31, 2023 6:08 pm If life expectancy did not change, spending would grow at the portfolio rate of return. Since life expectancy increases each year, spending grows slower than the portfolio rate of return.
really?
Yes.

When portfolio growth rate (r) = spending growth rate (g), amoritization becomes 1/ number of years left.

So if there are 30 years left, withdrawal rate is 1/30=3.33%.

If the portfolio balance is $1 million, then withdrawal is 3.33% of $1 million = $33,333

Remaining portfolio balance is $1 million - $33,333 = $966,677

Suppose portfolio growth rate (r) is 5%.

Then portfolio balance at start of the following year is $966,677*1.05 = $1,015,000

The following year, if life expectancy is not updated upwards, there will be 30-1 = 29 years left.

Withdrawal rate will be 1/29 = 3.45%

Withdrawal amount = 3.45% * $1,015,000 = $35,000

Spending growth (g) = $35,000/$33,333-1 = 5%, same as portfolio growth (r).

If, instead, life expectancy is updated upwards each year as the RMD calculations do, there will be more than 29 years left. So withdrawal rate will be less than 3.45%, withdrawal amount will be less than $35,000, and spending growth (g) will be less than 5% and so less than the portfolio rate of return (r).
Total Portfolio Allocation and Withdrawal (TPAW)
capran
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by capran »

Mestk5593 wrote: Fri Dec 16, 2022 8:13 am If one spends every dollar from RMD but does not withdraw additional $ from the portfolio that is subject to RMD, is it safe to assume that they will not outlive the portfolio? In other words, are RMD rates linked to life expectancy?

(Assume a 60/40 portfolio, average market conditions, etc. That is, there are no confounding factors to consider. Also, this is for planning/educational purposes only. We are not at RMD stage yet.)
What would be the disadvantage of reducing your IRA? Remember, you cannot convert RMD's to Roths. Over the last 10 years I have reduced my IRA to nothing, having converted most of it to a Roth. Just this month, my Roth earned over $2,500 and spouse is over 1,000, so that is currently tax free income. I know most people suggest keeping some IRA balance in case you need nursing care and therefore the IRA might be taxed at a lesser rate because of the deductibility of the care. Our goal is to get her IRA down to at least 400k before RMD's to maximize what we can convert. If we pass before needing any Roth money, our heirs will at least have 10 years to take the Roth out which will be tax free to them, rather than inheriting an IRA and having to pay a higher amount of tax on their own earnings as well as on the IRA that they inherit.
chassis
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by chassis »

Mestk5593 wrote: Fri Dec 16, 2022 8:13 am If one spends every dollar from RMD but does not withdraw additional $ from the portfolio that is subject to RMD, is it safe to assume that they will not outlive the portfolio? In other words, are RMD rates linked to life expectancy?

(Assume a 60/40 portfolio, average market conditions, etc. That is, there are no confounding factors to consider. Also, this is for planning/educational purposes only. We are not at RMD stage yet.)
Hypothetically RMDs will never deplete a portfolio. The age 120-and-over divisor is 2. From age 120 and beyond it will be a journey towards zero portfolio value, but one will always be only halfway there, never reaching the destination of an empty portfolio.
sc9182
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by sc9182 »

capran wrote: Thu Jun 01, 2023 10:34 am
Mestk5593 wrote: Fri Dec 16, 2022 8:13 am If one spends every dollar from RMD but does not withdraw additional $ from the portfolio that is subject to RMD, is it safe to assume that they will not outlive the portfolio? In other words, are RMD rates linked to life expectancy?

(Assume a 60/40 portfolio, average market conditions, etc. That is, there are no confounding factors to consider. Also, this is for planning/educational purposes only. We are not at RMD stage yet.)
What would be the disadvantage of reducing your IRA? Remember, you cannot convert RMD's to Roths. Over the last 10 years I have reduced my IRA to nothing, having converted most of it to a Roth. Just this month, my Roth earned over $2,500 and spouse is over 1,000, so that is currently tax free income. I know most people suggest keeping some IRA balance in case you need nursing care and therefore the IRA might be taxed at a lesser rate because of the deductibility of the care. Our goal is to get her IRA down to at least 400k before RMD's to maximize what we can convert. If we pass before needing any Roth money, our heirs will at least have 10 years to take the Roth out which will be tax free to them, rather than inheriting an IRA and having to pay a higher amount of tax on their own earnings as well as on the IRA that they inherit.
decent plan - if your plan to try not to touch/use Roth monies (mainly keeping those towards kids’ inheritance), either: you have additional streams of decent chunks of income towards living expenses (thus you hardly need to touch Roth monies for living/care); and/or not much intention of QCDs, and likely that all your kids are rather highly successful hence don’t need IRA monies (as implied by high tax brackets - and they are likely to be good savers)

have you given much thought to SORR (sequence of returns) risks to portfolio in retirement - and in what way Trad IRA could mitigate/absorb some of SORR risks ?

ourselves don’t have two max pensions, nor interested in annuity products. So, we optimize using large Trad IRA (hoping, as we are ways away for/from retirement), double max delayed SS. Of course we do have decent Roth/MBR (with possible Roth conversions prior to SS), and growing HSA (can’t beat its triple/quadruple tax advantage- if used wisely).

Diversity of accounts, and large Trad IRA is our plan .. (on top of two delayed max SS; and some Roth-conversions prior to SS)
capran
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by capran »

sc9182 wrote: Thu Jun 01, 2023 1:22 pm
capran wrote: Thu Jun 01, 2023 10:34 am
Mestk5593 wrote: Fri Dec 16, 2022 8:13 am If one spends every dollar from RMD but does not withdraw additional $ from the portfolio that is subject to RMD, is it safe to assume that they will not outlive the portfolio? In other words, are RMD rates linked to life expectancy?

(Assume a 60/40 portfolio, average market conditions, etc. That is, there are no confounding factors to consider. Also, this is for planning/educational purposes only. We are not at RMD stage yet.)
What would be the disadvantage of reducing your IRA? Remember, you cannot convert RMD's to Roths. Over the last 10 years I have reduced my IRA to nothing, having converted most of it to a Roth. Just this month, my Roth earned over $2,500 and spouse is over 1,000, so that is currently tax free income. I know most people suggest keeping some IRA balance in case you need nursing care and therefore the IRA might be taxed at a lesser rate because of the deductibility of the care. Our goal is to get her IRA down to at least 400k before RMD's to maximize what we can convert. If we pass before needing any Roth money, our heirs will at least have 10 years to take the Roth out which will be tax free to them, rather than inheriting an IRA and having to pay a higher amount of tax on their own earnings as well as on the IRA that they inherit.
decent plan - if your plan to try not to touch/use Roth monies (mainly keeping those towards kids’ inheritance), either: you have additional streams of decent chunks of income towards living expenses (thus you hardly need to touch Roth monies for living/care); and/or not much intention of QCDs, and likely that all your kids are rather highly successful hence don’t need IRA monies (as implied by high tax brackets - and they are likely to be good savers)

have you given much thought to SORR (sequence of returns) risks to portfolio in retirement - and in what way Trad IRA could mitigate/absorb some of SORR risks ?

ourselves don’t have two max pensions, nor interested in annuity products. So, we optimize using large Trad IRA (hoping, as we are ways away for/from retirement), double max delayed SS. Of course we do have decent Roth/MBR (with possible Roth conversions prior to SS), and growing HSA (can’t beat its triple/quadruple tax advantage- if used wisely).

Diversity of accounts, and large Trad IRA is our plan .. (on top of two delayed max SS; and some Roth-conversions prior to SS)
The only scenario where we might access the Roth money is if one of us needed nursing care. I'll have to read up on SORR. If we can't get her tIRA down before I pass, just her RMD will put her into the IRMAA surcharge, as well as a substantially higher tax bracket filing as single, not to consider how inheriting a large tIRA would boost our kids taxes way up.

We were good savers. I took a reduced pension so that she will get 100% of my COLA pension 23.3k, plus her current pension 25.3k and my SS 27.5k which I mistakenly took early. But it's more than enough to comfortably live on live on. In a year and a half her SS will start- current SS projection is 44.5k. For quite a few years we have been converting tIRA's to Roth, filling MAGI income to a couple of thousand below the IRMAA penalty. Did some max gifting for 2 years to help with a downpayment, but still have never touched our Roths. Been increasing our spending this year upgrading to a bigger boat which we live on and travel during the summer months, and doing some month long travels Spring and Fall. We feel so fortunate. Might consider QCD's or just pay the IRMAA charges, especially when she files as single.
sc9182
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by sc9182 »

capran wrote: Thu Jun 01, 2023 11:54 pm
sc9182 wrote: Thu Jun 01, 2023 1:22 pm
capran wrote: Thu Jun 01, 2023 10:34 am
Mestk5593 wrote: Fri Dec 16, 2022 8:13 am If one spends every dollar from RMD but does not withdraw additional $ from the portfolio that is subject to RMD, is it safe to assume that they will not outlive the portfolio? In other words, are RMD rates linked to life expectancy?

(Assume a 60/40 portfolio, average market conditions, etc. That is, there are no confounding factors to consider. Also, this is for planning/educational purposes only. We are not at RMD stage yet.)
What would be the disadvantage of reducing your IRA? Remember, you cannot convert RMD's to Roths. Over the last 10 years I have reduced my IRA to nothing, having converted most of it to a Roth. Just this month, my Roth earned over $2,500 and spouse is over 1,000, so that is currently tax free income. I know most people suggest keeping some IRA balance in case you need nursing care and therefore the IRA might be taxed at a lesser rate because of the deductibility of the care. Our goal is to get her IRA down to at least 400k before RMD's to maximize what we can convert. If we pass before needing any Roth money, our heirs will at least have 10 years to take the Roth out which will be tax free to them, rather than inheriting an IRA and having to pay a higher amount of tax on their own earnings as well as on the IRA that they inherit.
decent plan - if your plan to try not to touch/use Roth monies (mainly keeping those towards kids’ inheritance), either: you have additional streams of decent chunks of income towards living expenses (thus you hardly need to touch Roth monies for living/care); and/or not much intention of QCDs, and likely that all your kids are rather highly successful hence don’t need IRA monies (as implied by high tax brackets - and they are likely to be good savers)

have you given much thought to SORR (sequence of returns) risks to portfolio in retirement - and in what way Trad IRA could mitigate/absorb some of SORR risks ?

ourselves don’t have two max pensions, nor interested in annuity products. So, we optimize using large Trad IRA (hoping, as we are ways away for/from retirement), double max delayed SS. Of course we do have decent Roth/MBR (with possible Roth conversions prior to SS), and growing HSA (can’t beat its triple/quadruple tax advantage- if used wisely).

Diversity of accounts, and large Trad IRA is our plan .. (on top of two delayed max SS; and some Roth-conversions prior to SS)
The only scenario where we might access the Roth money is if one of us needed nursing care. I'll have to read up on SORR. If we can't get her tIRA down before I pass, just her RMD will put her into the IRMAA surcharge, as well as a substantially higher tax bracket filing as single, not to consider how inheriting a large tIRA would boost our kids taxes way up.

We were good savers. I took a reduced pension so that she will get 100% of my COLA pension 23.3k, plus her current pension 25.3k and my SS 27.5k which I mistakenly took early. But it's more than enough to comfortably live on live on. In a year and a half her SS will start- current SS projection is 44.5k. For quite a few years we have been converting tIRA's to Roth, filling MAGI income to a couple of thousand below the IRMAA penalty. Did some max gifting for 2 years to help with a downpayment, but still have never touched our Roths. Been increasing our spending this year upgrading to a bigger boat which we live on and travel during the summer months, and doing some month long travels Spring and Fall. We feel so fortunate. Might consider QCD's or just pay the IRMAA charges, especially when she files as single.
‘Bless - you definitely seems to be in good financial situation with tIRA and Roth IRA or likely to do just fine,
even without both of those accounts!! Sure can plan for passing assets via legacy/bequest purposes - mostly, Roth IRA seems better - especially given if you never have to “need/touch” it decades on end - allowing it to compound !!

For folks (like us) who need some monies to live on (withdrawing from) TradIRA — SORR, filling up lower-tax brackets, having decent space before hitting IRMAA limits, QCD-intent, possible need for paying for LTC needs, unknown future inflation impacts, among other things — we will be too happy to build/have large Trad IRA balances (RMDs be d.rn’ed - we actually welcome huge RMDs)
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by montanagirl »

AAA wrote: Fri Dec 16, 2022 8:47 am
Call_Me_Op wrote: Fri Dec 16, 2022 8:20 amYou are not forced to spend the money distributed by your RMDs.
But an RMD is taxed as income, so part of it could be considered as spent.
It can still be invested in taxable.
capran
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by capran »

sc9182 wrote: Fri Jun 02, 2023 9:26 am
capran wrote: Thu Jun 01, 2023 11:54 pm
sc9182 wrote: Thu Jun 01, 2023 1:22 pm
capran wrote: Thu Jun 01, 2023 10:34 am
Mestk5593 wrote: Fri Dec 16, 2022 8:13 am If one spends every dollar from RMD but does not withdraw additional $ from the portfolio that is subject to RMD, is it safe to assume that they will not outlive the portfolio? In other words, are RMD rates linked to life expectancy?

(Assume a 60/40 portfolio, average market conditions, etc. That is, there are no confounding factors to consider. Also, this is for planning/educational purposes only. We are not at RMD stage yet.)
What would be the disadvantage of reducing your IRA? Remember, you cannot convert RMD's to Roths. Over the last 10 years I have reduced my IRA to nothing, having converted most of it to a Roth. Just this month, my Roth earned over $2,500 and spouse is over 1,000, so that is currently tax free income. I know most people suggest keeping some IRA balance in case you need nursing care and therefore the IRA might be taxed at a lesser rate because of the deductibility of the care. Our goal is to get her IRA down to at least 400k before RMD's to maximize what we can convert. If we pass before needing any Roth money, our heirs will at least have 10 years to take the Roth out which will be tax free to them, rather than inheriting an IRA and having to pay a higher amount of tax on their own earnings as well as on the IRA that they inherit.
decent plan - if your plan to try not to touch/use Roth monies (mainly keeping those towards kids’ inheritance), either: you have additional streams of decent chunks of income towards living expenses (thus you hardly need to touch Roth monies for living/care); and/or not much intention of QCDs, and likely that all your kids are rather highly successful hence don’t need IRA monies (as implied by high tax brackets - and they are likely to be good savers)

have you given much thought to SORR (sequence of returns) risks to portfolio in retirement - and in what way Trad IRA could mitigate/absorb some of SORR risks ?

ourselves don’t have two max pensions, nor interested in annuity products. So, we optimize using large Trad IRA (hoping, as we are ways away for/from retirement), double max delayed SS. Of course we do have decent Roth/MBR (with possible Roth conversions prior to SS), and growing HSA (can’t beat its triple/quadruple tax advantage- if used wisely).

Diversity of accounts, and large Trad IRA is our plan .. (on top of two delayed max SS; and some Roth-conversions prior to SS)
The only scenario where we might access the Roth money is if one of us needed nursing care. I'll have to read up on SORR. If we can't get her tIRA down before I pass, just her RMD will put her into the IRMAA surcharge, as well as a substantially higher tax bracket filing as single, not to consider how inheriting a large tIRA would boost our kids taxes way up.

We were good savers. I took a reduced pension so that she will get 100% of my COLA pension 23.3k, plus her current pension 25.3k and my SS 27.5k which I mistakenly took early. But it's more than enough to comfortably live on live on. In a year and a half her SS will start- current SS projection is 44.5k. For quite a few years we have been converting tIRA's to Roth, filling MAGI income to a couple of thousand below the IRMAA penalty. Did some max gifting for 2 years to help with a downpayment, but still have never touched our Roths. Been increasing our spending this year upgrading to a bigger boat which we live on and travel during the summer months, and doing some month long travels Spring and Fall. We feel so fortunate. Might consider QCD's or just pay the IRMAA charges, especially when she files as single.
‘Bless - you definitely seems to be in good financial situation with tIRA and Roth IRA or likely to do just fine,
even without both of those accounts!! Sure can plan for passing assets via legacy/bequest purposes - mostly, Roth IRA seems better - especially given if you never have to “need/touch” it decades on end - allowing it to compound !!

For folks (like us) who need some monies to live on (withdrawing from) TradIRA — SORR, filling up lower-tax brackets, having decent space before hitting IRMAA limits, QCD-intent, possible need for paying for LTC needs, unknown future inflation impacts, among other things — we will be too happy to build/have large Trad IRA balances (RMDs be d.rn’ed - we actually welcome huge RMDs)
There are so many unknowns, especially around inflation, longevity and LTC. All we can do is make the best decisions over which we have control, and our best guesses. But I know even though I'm close to 71 and in good health there are no guarantees. Been to services of several same age friends to remind me how fragile life is. Our biggest concern is what a surviving spouse would face in terms of tax brackets and IRMAA. I know it will be above the top of the 22%/IRMAA threshold we deal with now. And secondarily, at the point of inheritance, the 10 year IRA depletion rules they set up would mean they would pay much more in taxes, both from their own paycheck as well as the inherited IRA (and again, a much higher bracket than if we convert now as MFJ). Such a complex game with so many moving parts. I also like the simplicity. With no RMD for me, we have 4 more years to work on getting hers down to a level that might put her close to avoiding IRMAA when I pass. Huge RMD's just mean there's a big balance upon which to draw, which is a good thing. Best of luck to you!
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celia
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by celia »

montanagirl wrote: Fri Jun 02, 2023 12:29 pm
AAA wrote: Fri Dec 16, 2022 8:47 am
Call_Me_Op wrote: Fri Dec 16, 2022 8:20 amYou are not forced to spend the money distributed by your RMDs.
But an RMD is taxed as income, so part of it could be considered as spent.
It can still be invested in taxable.
I think AAA meant that since the RMD is taxed, some of it is spent on taxes. Of course, you could pay the tax from Taxable, but you would still end up with the same amount in Taxable regardless of how you paid the tax. Maybe this should have been written: "But an RMD is taxed as income, so part of it should be considered as spent."
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by FactualFran »

chassis wrote: Thu Jun 01, 2023 11:18 am Hypothetically RMDs will never deplete a portfolio. The age 120-and-over divisor is 2. From age 120 and beyond it will be a journey towards zero portfolio value, but one will always be only halfway there, never reaching the destination of an empty portfolio.
Hypothetically, a RMD can deplete a portfolio. Between the end of the previous year and when the distribution is taken, the portfolio return could be sufficiently negative so that the portfolio balance is less than the RMD amount.
billaster
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by billaster »

celia wrote: Fri Jun 02, 2023 2:08 pm I think AAA meant that since the RMD is taxed, some of it is spent on taxes. Of course, you could pay the tax from Taxable, but you would still end up with the same amount in Taxable regardless of how you paid the tax. Maybe this should have been written: "But an RMD is taxed as income, so part of it should be considered as spent."
It was spent when you put it in and you incurred a debt to the government. It's called "tax-deferred" not "tax-free." You are deluding yourself if you consider it all as your money.
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by toddthebod »

FactualFran wrote: Fri Jun 02, 2023 2:26 pm
chassis wrote: Thu Jun 01, 2023 11:18 am Hypothetically RMDs will never deplete a portfolio. The age 120-and-over divisor is 2. From age 120 and beyond it will be a journey towards zero portfolio value, but one will always be only halfway there, never reaching the destination of an empty portfolio.
Hypothetically, a RMD can deplete a portfolio. Between the end of the previous year and when the distribution is taken, the portfolio return could be sufficiently negative so that the portfolio balance is less than the RMD amount.
interestingly, I don't see any exception listed in Pub 590-B or Form 5329 for this circumstance. I must be missing something, because otherwise you'd still owe the excise tax even though it was not feasible to distribute your RMD.
chassis
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by chassis »

FactualFran wrote: Fri Jun 02, 2023 2:26 pm
chassis wrote: Thu Jun 01, 2023 11:18 am Hypothetically RMDs will never deplete a portfolio. The age 120-and-over divisor is 2. From age 120 and beyond it will be a journey towards zero portfolio value, but one will always be only halfway there, never reaching the destination of an empty portfolio.
Hypothetically, a RMD can deplete a portfolio. Between the end of the previous year and when the distribution is taken, the portfolio return could be sufficiently negative so that the portfolio balance is less than the RMD amount.
True. The portfolio could be depleted after 30 years of consecutive -80% returns, and during those 30 years the -80% return occurred before the RMD was taken.

Let's rephrase: RMDs will not deplete a portfolio
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White Coat Investor
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by White Coat Investor »

Mestk5593 wrote: Fri Dec 16, 2022 8:13 am If one spends every dollar from RMD but does not withdraw additional $ from the portfolio that is subject to RMD, is it safe to assume that they will not outlive the portfolio? In other words, are RMD rates linked to life expectancy?

(Assume a 60/40 portfolio, average market conditions, etc. That is, there are no confounding factors to consider. Also, this is for planning/educational purposes only. We are not at RMD stage yet.)
You know you don't have to spend an RMD, right? You just have to give the government their share of the account and you get to keep your share. You can reinvest that back into the portfolio in the taxable account. Same exact portfolio after tax as before the RMD.

But yes, just spending the RMD is actually a pretty good withdrawal strategy. Probably significantly better than the classic 4% method that nobody uses. But your withdrawals will be variable each year and absolutely could go down. They won't ever go to zero though.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
milktoast
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by milktoast »

22twain wrote: Fri Dec 16, 2022 5:36 pm I updated my graphs to extend them to age 115 and show the effect of a 3% inflation rate. (Still 5% nominal growth rate.)
Interesting graph. At roughly 2% real the annual real income is pretty flat.
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by grok87 »

White Coat Investor wrote: Sat Jun 03, 2023 10:54 am
Mestk5593 wrote: Fri Dec 16, 2022 8:13 am If one spends every dollar from RMD but does not withdraw additional $ from the portfolio that is subject to RMD, is it safe to assume that they will not outlive the portfolio? In other words, are RMD rates linked to life expectancy?

(Assume a 60/40 portfolio, average market conditions, etc. That is, there are no confounding factors to consider. Also, this is for planning/educational purposes only. We are not at RMD stage yet.)
You know you don't have to spend an RMD, right? You just have to give the government their share of the account and you get to keep your share. You can reinvest that back into the portfolio in the taxable account. Same exact portfolio after tax as before the RMD.

But yes, just spending the RMD is actually a pretty good withdrawal strategy. Probably significantly better than the classic 4% method that nobody uses. But your withdrawals will be variable each year and absolutely could go down. They won't ever go to zero though.
Agree. My portfolio has two pieces. A liability matching portfolio = 30 year tips ladder. and a Risk portfolio that is mostly stocks.
i'm planning to use a RMD-withdrawal approach for my Risk portfolio. That could lead to somewhat variable withdrawals as you say. But the fixed real amounts coming from the 30 year TIPS ladder should help make the total somewhat less variable on a percentage basis.

cheers,
grok
RIP Mr. Bogle.
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tetractys
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by tetractys »

I have two IRA portfolios requiring RMD’s. One is inherited and so I’ve been taking RMD’s already for several years now from that portfolio. When I hit 70 I will combine RMD’s for both portfolios, taking them all from the inherited portfolio, thus depleting that portfolio faster. In a case like this one could outlive their IRA.
FactualFran
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by FactualFran »

chassis wrote: Fri Jun 02, 2023 8:19 pm True. The portfolio could be depleted after 30 years of consecutive -80% returns, and during those 30 years the -80% return occurred before the RMD was taken.
30 consecutive years of negative returns are not necessary. Only one year with a sufficiently negative return is required for the hypothetical of a RMD depleting a portfolio.
FactualFran
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by FactualFran »

tetractys wrote: Sat Jun 03, 2023 1:14 pm I have two IRA portfolios requiring RMD’s. One is inherited and so I’ve been taking RMD’s already for several years now from that portfolio. When I hit 70 I will combine RMD’s for both portfolios, taking them all from the inherited portfolio, thus depleting that portfolio faster. In a case like this one could outlive their IRA.
What income tax regulation allows a distribution from an IRA for which an individual is a beneficiary to count against the required minimum distribution for an IRA of the individual as the owner?

Here is part of 26CFR1.408-8, the regulation about "Distribution requirements for individual retirement plans".
Q–9. Is the required minimum distribution from one IRA of an owner permitted to be distributed from another IRA in order to satisfy section 401(a)(9)?

A–9. Yes, the required minimum distribution must be calculated separately for each IRA. The separately calculated amounts may then be totaled and the total distribution taken from any one or more of the individual's IRAs under the rules set forth in this A–9. Generally, only amounts in IRAs that an individual holds as the IRA owner may be aggregated. However, amounts in IRAs that an individual holds as a beneficiary of the same decedent and which are being distributed under the life expectancy rule in section 401(a)(9)(B)(iii) or (iv) may be aggregated, but such amounts may not be aggregated with amounts held in IRAs that the individual holds as the IRA owner or as the beneficiary of another decedent. Distributions from section 403(b) contracts or accounts will not satisfy the distribution requirements from IRAs, nor will distributions from IRAs satisfy the distribution requirements from section 403(b) contracts or accounts. Distributions from Roth IRAs (defined in section 408A) will not satisfy the distribution requirements applicable to IRAs or section 403(b) accounts or contracts and distributions from IRAs or section 403(b) contracts or accounts will not satisfy the distribution requirements from Roth IRAs.\
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by toddthebod »

FactualFran wrote: Sat Jun 03, 2023 4:54 pm
chassis wrote: Fri Jun 02, 2023 8:19 pm True. The portfolio could be depleted after 30 years of consecutive -80% returns, and during those 30 years the -80% return occurred before the RMD was taken.
30 consecutive years of negative returns are not necessary. Only one year with a sufficiently negative return is required for the hypothetical of a RMD depleting a portfolio.
That does seem extremely unlikely. Even at age 100 you are only required to distribute ~16% of your IRA, meaning you'd need an 84% crash for that to fully deplete your account, and that would have to be in a single calendar year.
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by tetractys »

FactualFran wrote: Sat Jun 03, 2023 4:57 pm
tetractys wrote: Sat Jun 03, 2023 1:14 pm I have two IRA portfolios requiring RMD’s. One is inherited and so I’ve been taking RMD’s already for several years now from that portfolio. When I hit 70 I will combine RMD’s for both portfolios, taking them all from the inherited portfolio, thus depleting that portfolio faster. In a case like this one could outlive their IRA.
What income tax regulation allows a distribution from an IRA for which an individual is a beneficiary to count against the required minimum distribution for an IRA of the individual as the owner?

Here is part of 26CFR1.408-8, the regulation about "Distribution requirements for individual retirement plans".
Q–9. Is the required minimum distribution from one IRA of an owner permitted to be distributed from another IRA in order to satisfy section 401(a)(9)?

A–9. Yes, the required minimum distribution must be calculated separately for each IRA. The separately calculated amounts may then be totaled and the total distribution taken from any one or more of the individual's IRAs under the rules set forth in this A–9. Generally, only amounts in IRAs that an individual holds as the IRA owner may be aggregated. However, amounts in IRAs that an individual holds as a beneficiary of the same decedent and which are being distributed under the life expectancy rule in section 401(a)(9)(B)(iii) or (iv) may be aggregated, but such amounts may not be aggregated with amounts held in IRAs that the individual holds as the IRA owner or as the beneficiary of another decedent. Distributions from section 403(b) contracts or accounts will not satisfy the distribution requirements from IRAs, nor will distributions from IRAs satisfy the distribution requirements from section 403(b) contracts or accounts. Distributions from Roth IRAs (defined in section 408A) will not satisfy the distribution requirements applicable to IRAs or section 403(b) accounts or contracts and distributions from IRAs or section 403(b) contracts or accounts will not satisfy the distribution requirements from Roth IRAs.\
Interesting Q&A. Can you find the actual regulation? I’m looking but haven’t been able to find it. Do you know when it went or will come into effect?
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by Artsdoctor »

FactualFran wrote: Fri Dec 16, 2022 2:42 pm It is safe to assume that RMDs won't deplete a portfolio, however it is mathematically possible. The RMD amount depends on the portfolio balance at the end of the previous year. It is possible that between the end of the previous year and when the RMD is taken the balance of the portfolio has dropped below the RMD amount.
That would be one nasty bear market! Or a hyper-inflationary shock. Hopefully, we'll not experience anything like that although if one knows one's history . . .
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by chassis »

toddthebod wrote: Sat Jun 03, 2023 4:59 pm
FactualFran wrote: Sat Jun 03, 2023 4:54 pm
chassis wrote: Fri Jun 02, 2023 8:19 pm True. The portfolio could be depleted after 30 years of consecutive -80% returns, and during those 30 years the -80% return occurred before the RMD was taken.
30 consecutive years of negative returns are not necessary. Only one year with a sufficiently negative return is required for the hypothetical of a RMD depleting a portfolio.
That does seem extremely unlikely. Even at age 100 you are only required to distribute ~16% of your IRA, meaning you'd need an 84% crash for that to fully deplete your account, and that would have to be in a single calendar year.
Precisely.

RMDs will not deplete a portfolio.
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by FactualFran »

tetractys wrote: Sat Jun 03, 2023 6:53 pm
FactualFran wrote: Sat Jun 03, 2023 4:57 pm
tetractys wrote: Sat Jun 03, 2023 1:14 pm I have two IRA portfolios requiring RMD’s. One is inherited and so I’ve been taking RMD’s already for several years now from that portfolio. When I hit 70 I will combine RMD’s for both portfolios, taking them all from the inherited portfolio, thus depleting that portfolio faster. In a case like this one could outlive their IRA.
What income tax regulation allows a distribution from an IRA for which an individual is a beneficiary to count against the required minimum distribution for an IRA of the individual as the owner?

Here is part of 26CFR1.408-8, the regulation about "Distribution requirements for individual retirement plans".
Q–9. Is the required minimum distribution from one IRA of an owner permitted to be distributed from another IRA in order to satisfy section 401(a)(9)?

A–9. Yes, the required minimum distribution must be calculated separately for each IRA. The separately calculated amounts may then be totaled and the total distribution taken from any one or more of the individual's IRAs under the rules set forth in this A–9. Generally, only amounts in IRAs that an individual holds as the IRA owner may be aggregated. However, amounts in IRAs that an individual holds as a beneficiary of the same decedent and which are being distributed under the life expectancy rule in section 401(a)(9)(B)(iii) or (iv) may be aggregated, but such amounts may not be aggregated with amounts held in IRAs that the individual holds as the IRA owner or as the beneficiary of another decedent. Distributions from section 403(b) contracts or accounts will not satisfy the distribution requirements from IRAs, nor will distributions from IRAs satisfy the distribution requirements from section 403(b) contracts or accounts. Distributions from Roth IRAs (defined in section 408A) will not satisfy the distribution requirements applicable to IRAs or section 403(b) accounts or contracts and distributions from IRAs or section 403(b) contracts or accounts will not satisfy the distribution requirements from Roth IRAs.\
Interesting Q&A. Can you find the actual regulation? I’m looking but haven’t been able to find it. Do you know when it went or will come into effect?
The regulation is written as a sequence of Questions and Answers. I included a link to the regulation (26CFR1.408-8) in the post and the relevant text. I don't know when the regulation was originally written. A version from 2002, starting of page 140 of the pdf, has the same wording (with typographically differences in the character used for apostrophe and dash).
sc9182
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by sc9182 »

tetractys wrote: Sat Jun 03, 2023 1:14 pm I have two IRA portfolios requiring RMD’s. One is inherited and so I’ve been taking RMD’s already for several years now from that portfolio. When I hit 70 I will combine RMD’s for both portfolios, taking them all from the inherited portfolio, thus depleting that portfolio faster. In a case like this one could outlive their IRA.
Sorry to ask this - why do you even want to co-mingle/combine Inherited-IRA and own Trad IRA (RMD) withdrawals !?

How about you take RMD from own account for combined total of Own+Spouse-RMD from own portfolio— and call it even — have you tried it successfully (or thought it will meet the RMD requirements of spouse’s RMD !?)

please let us know ..

Alternately, if own IRA can/allowed-to get extended benefit to disabled-kid, have you tried to look up regulation (or negative of it - which you are similarly asking !!) - if your”inherited-IRA can be used towards disabled-kid’s 10-year rule exemption !? (i am sure someone encountered this - but do we know rightful answer to this !?)
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by sc9182 »

Sorry - duplicate/double-post. Deleted.
Last edited by sc9182 on Sun Jun 04, 2023 11:51 am, edited 1 time in total.
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by smitcat »

sc9182 wrote: Thu Jun 01, 2023 1:22 pm
capran wrote: Thu Jun 01, 2023 10:34 am
Mestk5593 wrote: Fri Dec 16, 2022 8:13 am If one spends every dollar from RMD but does not withdraw additional $ from the portfolio that is subject to RMD, is it safe to assume that they will not outlive the portfolio? In other words, are RMD rates linked to life expectancy?

(Assume a 60/40 portfolio, average market conditions, etc. That is, there are no confounding factors to consider. Also, this is for planning/educational purposes only. We are not at RMD stage yet.)
What would be the disadvantage of reducing your IRA? Remember, you cannot convert RMD's to Roths. Over the last 10 years I have reduced my IRA to nothing, having converted most of it to a Roth. Just this month, my Roth earned over $2,500 and spouse is over 1,000, so that is currently tax free income. I know most people suggest keeping some IRA balance in case you need nursing care and therefore the IRA might be taxed at a lesser rate because of the deductibility of the care. Our goal is to get her IRA down to at least 400k before RMD's to maximize what we can convert. If we pass before needing any Roth money, our heirs will at least have 10 years to take the Roth out which will be tax free to them, rather than inheriting an IRA and having to pay a higher amount of tax on their own earnings as well as on the IRA that they inherit.
decent plan - if your plan to try not to touch/use Roth monies (mainly keeping those towards kids’ inheritance), either: you have additional streams of decent chunks of income towards living expenses (thus you hardly need to touch Roth monies for living/care); and/or not much intention of QCDs, and likely that all your kids are rather highly successful hence don’t need IRA monies (as implied by high tax brackets - and they are likely to be good savers)

have you given much thought to SORR (sequence of returns) risks to portfolio in retirement - and in what way Trad IRA could mitigate/absorb some of SORR risks ?

ourselves don’t have two max pensions, nor interested in annuity products. So, we optimize using large Trad IRA (hoping, as we are ways away for/from retirement), double max delayed SS. Of course we do have decent Roth/MBR (with possible Roth conversions prior to SS), and growing HSA (can’t beat its triple/quadruple tax advantage- if used wisely).

Diversity of accounts, and large Trad IRA is our plan .. (on top of two delayed max SS; and some Roth-conversions prior to SS)

"Diversity of accounts, and large Trad IRA is our plan .. (on top of two delayed max SS; and some Roth-conversions prior to SS)"
Roth conversions can often be very valuable - there are a number of calculators that can help model future scenarios even before you get near retirement age. RPM and Pralana are the two that we have used with great success - they do require some time to setup, run, and then review and understand the results but it is well worth the time.
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by toddthebod »

Deleted
Last edited by toddthebod on Sun Jun 04, 2023 9:38 pm, edited 1 time in total.
sc9182
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by sc9182 »

smitcat wrote: Sun Jun 04, 2023 8:11 am
sc9182 wrote: Thu Jun 01, 2023 1:22 pm
capran wrote: Thu Jun 01, 2023 10:34 am
Mestk5593 wrote: Fri Dec 16, 2022 8:13 am If one spends every dollar from RMD but does not withdraw additional $ from the portfolio that is subject to RMD, is it safe to assume that they will not outlive the portfolio? In other words, are RMD rates linked to life expectancy?

(Assume a 60/40 portfolio, average market conditions, etc. That is, there are no confounding factors to consider. Also, this is for planning/educational purposes only. We are not at RMD stage yet.)
What would be the disadvantage of reducing your IRA? Remember, you cannot convert RMD's to Roths. Over the last 10 years I have reduced my IRA to nothing, having converted most of it to a Roth. Just this month, my Roth earned over $2,500 and spouse is over 1,000, so that is currently tax free income. I know most people suggest keeping some IRA balance in case you need nursing care and therefore the IRA might be taxed at a lesser rate because of the deductibility of the care. Our goal is to get her IRA down to at least 400k before RMD's to maximize what we can convert. If we pass before needing any Roth money, our heirs will at least have 10 years to take the Roth out which will be tax free to them, rather than inheriting an IRA and having to pay a higher amount of tax on their own earnings as well as on the IRA that they inherit.
decent plan - if your plan to try not to touch/use Roth monies (mainly keeping those towards kids’ inheritance), either: you have additional streams of decent chunks of income towards living expenses (thus you hardly need to touch Roth monies for living/care); and/or not much intention of QCDs, and likely that all your kids are rather highly successful hence don’t need IRA monies (as implied by high tax brackets - and they are likely to be good savers)

have you given much thought to SORR (sequence of returns) risks to portfolio in retirement - and in what way Trad IRA could mitigate/absorb some of SORR risks ?

ourselves don’t have two max pensions, nor interested in annuity products. So, we optimize using large Trad IRA (hoping, as we are ways away for/from retirement), double max delayed SS. Of course we do have decent Roth/MBR (with possible Roth conversions prior to SS), and growing HSA (can’t beat its triple/quadruple tax advantage- if used wisely).

Diversity of accounts, and large Trad IRA is our plan .. (on top of two delayed max SS; and some Roth-conversions prior to SS)

"Diversity of accounts, and large Trad IRA is our plan .. (on top of two delayed max SS; and some Roth-conversions prior to SS)"
Roth conversions can often be very valuable - there are a number of calculators that can help model future scenarios even before you get near retirement age. RPM and Pralana are the two that we have used with great success - they do require some time to setup, run, and then review and understand the results but it is well worth the time.
Nothing for or against modeling tools - we are ways (possibly decades) away from needing/using those. We also need to consider ACA, geo-arbitration, future & kids (not just ours, but kids’ brackets too) potential tax brackets, portfolio/market returns, inflation - most importantly continue to strive for further career/income growth.

Most of which (above) points are harder to model, let alone actualize/realize. To throw wrench into planning, life can throw surprises (unexpected but possible) - disability, bad-health, D & D .. among other scenarios. Kind of hard to model those .. yes, we prepare for such “personal black-swan” events - but, hard to predict/model those ..

Anyhow - many a modeling software(s) have failed to account for ever changing (and changing at each state level) ACA (if one would consider early retire), need/utility for limited amounts of term-insurance going into RMD ages., utilizing Kid’s tax brackets into our own modeling., step-up basis assets/businesses, and/or unable to figure accumulated depreciation write-off upon demise, Trad IRAs role towards LTC needs, large deductible medical/health/vision/dental expenses planning (over 7% agi) — among other things.

Worse yet - many software prescribe (sorry to say this) aggressive Roth conversions. We love to pay taxes, but not excited to pay it upfront - considering how useful large Trad IRA could be in our case (see previous post about us not having double max-pensions, not interested in annuities).

Anyhow - by the time we consider retire/early retire — hoping modeling software(s) will become ever more feature rich, and stop-pushing unnecessary (at times) aggressive-Roth conversions :-)
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by smitcat »

sc9182 wrote: Sun Jun 04, 2023 12:10 pm
smitcat wrote: Sun Jun 04, 2023 8:11 am
sc9182 wrote: Thu Jun 01, 2023 1:22 pm
capran wrote: Thu Jun 01, 2023 10:34 am
Mestk5593 wrote: Fri Dec 16, 2022 8:13 am If one spends every dollar from RMD but does not withdraw additional $ from the portfolio that is subject to RMD, is it safe to assume that they will not outlive the portfolio? In other words, are RMD rates linked to life expectancy?

(Assume a 60/40 portfolio, average market conditions, etc. That is, there are no confounding factors to consider. Also, this is for planning/educational purposes only. We are not at RMD stage yet.)
What would be the disadvantage of reducing your IRA? Remember, you cannot convert RMD's to Roths. Over the last 10 years I have reduced my IRA to nothing, having converted most of it to a Roth. Just this month, my Roth earned over $2,500 and spouse is over 1,000, so that is currently tax free income. I know most people suggest keeping some IRA balance in case you need nursing care and therefore the IRA might be taxed at a lesser rate because of the deductibility of the care. Our goal is to get her IRA down to at least 400k before RMD's to maximize what we can convert. If we pass before needing any Roth money, our heirs will at least have 10 years to take the Roth out which will be tax free to them, rather than inheriting an IRA and having to pay a higher amount of tax on their own earnings as well as on the IRA that they inherit.
decent plan - if your plan to try not to touch/use Roth monies (mainly keeping those towards kids’ inheritance), either: you have additional streams of decent chunks of income towards living expenses (thus you hardly need to touch Roth monies for living/care); and/or not much intention of QCDs, and likely that all your kids are rather highly successful hence don’t need IRA monies (as implied by high tax brackets - and they are likely to be good savers)

have you given much thought to SORR (sequence of returns) risks to portfolio in retirement - and in what way Trad IRA could mitigate/absorb some of SORR risks ?

ourselves don’t have two max pensions, nor interested in annuity products. So, we optimize using large Trad IRA (hoping, as we are ways away for/from retirement), double max delayed SS. Of course we do have decent Roth/MBR (with possible Roth conversions prior to SS), and growing HSA (can’t beat its triple/quadruple tax advantage- if used wisely).

Diversity of accounts, and large Trad IRA is our plan .. (on top of two delayed max SS; and some Roth-conversions prior to SS)

"Diversity of accounts, and large Trad IRA is our plan .. (on top of two delayed max SS; and some Roth-conversions prior to SS)"
Roth conversions can often be very valuable - there are a number of calculators that can help model future scenarios even before you get near retirement age. RPM and Pralana are the two that we have used with great success - they do require some time to setup, run, and then review and understand the results but it is well worth the time.
Nothing for or against modeling tools - we are ways (possibly decades) away from needing/using those. We also need to consider ACA, geo-arbitration, future & kids (not just ours, but kids’ brackets too) potential tax brackets, portfolio/market returns, inflation - most importantly continue to strive for further career/income growth.

Most of which (above) points are harder to model, let alone actualize/realize. To throw wrench into planning, life can throw surprises (unexpected but possible) - disability, bad-health, D & D .. among other scenarios. Kind of hard to model those .. yes, we prepare for such “personal black-swan” events - but, hard to predict/model those ..

Anyhow - many a modeling software(s) have failed to account for ever changing (and changing at each state level) ACA (if one would consider early retire), need/utility for limited amounts of term-insurance going into RMD ages., utilizing Kid’s tax brackets into our own modeling., step-up basis assets/businesses, and/or unable to figure accumulated depreciation write-off upon demise, Trad IRAs role towards LTC needs, large deductible medical/health/vision/dental expenses planning (over 7% agi) — among other things.

Worse yet - many software prescribe (sorry to say this) aggressive Roth conversions. We love to pay taxes, but not excited to pay it upfront - considering how useful large Trad IRA could be in our case (see previous post about us not having double max-pensions, not interested in annuities).

Anyhow - by the time we consider retire/early retire — hoping modeling software(s) will become ever more feature rich, and stop-pushing unnecessary (at times) aggressive-Roth conversions :-)
I guess if you are so far away from retirement than all of this is too complicated to model. Fortunately, that was/is not the case with us and the calculators are quite robust with many features - that is what takes some time to master.
If you happen to save a bunch and do not have too many of the 'problems' listed in your post ...you may benefit from running some models that likely will indicate an advantage to back off on pretax accounts and/or performing some aggressive conversions along the way.
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tetractys
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by tetractys »

sc9182 wrote: Sun Jun 04, 2023 12:15 am
tetractys wrote: Sat Jun 03, 2023 1:14 pm I have two IRA portfolios requiring RMD’s. One is inherited and so I’ve been taking RMD’s already for several years now from that portfolio. When I hit 70 I will combine RMD’s for both portfolios, taking them all from the inherited portfolio, thus depleting that portfolio faster. In a case like this one could outlive their IRA.
Sorry to ask this - why do you even want to co-mingle/combine Inherited-IRA and own Trad IRA (RMD) withdrawals !?

How about you take RMD from own account for combined total of Own+Spouse-RMD from own portfolio— and call it even — have you tried it successfully (or thought it will meet the RMD requirements of spouse’s RMD !?)

please let us know ..

Alternately, if own IRA can/allowed-to get extended benefit to disabled-kid, have you tried to look up regulation (or negative of it - which you are similarly asking !!) - if your”inherited-IRA can be used towards disabled-kid’s 10-year rule exemption !? (i am sure someone encountered this - but do we know rightful answer to this !?)
This is a question about aggregating RMD's to deplete the inherited IRA faster. But according to the Q&A above that's not possible. I asked about access to the actual law and the poster stated the Q&A is the actual law (I think). Sorry I don't understand what you're asking about the disabled kid's 10 year rule or spousal RMD's.

Anyway it will be a few years before my regular IRA is subject to RMD's, and I don't see much immediate concern about unknown future laws.
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by FactualFran »

sc9182 wrote: Sun Jun 04, 2023 12:15 am How about you take RMD from own account for combined total of Own+Spouse-RMD from own portfolio— and call it even — have you tried it successfully (or thought it will meet the RMD requirements of spouse’s RMD !?)
If the IRS checks the details, they will deem that excise tax is owned on the difference between the spouse's RMD and the distribution amount taken from account(s) of that individual.
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by FactualFran »

tetractys wrote: Sun Jun 04, 2023 8:51 pm This is a question about aggregating RMD's to deplete the inherited IRA faster. But according to the Q&A above that's not possible. I asked about access to the actual law and the poster stated the Q&A is the actual law (I think). Sorry I don't understand what you're asking about the disabled kid's 10 year rule or spousal RMD's.
The Q&A is from the regulations written by the executive branch of the government and describes details about how the executive branch applies the law. The law is written by the legislative branch (Congress). A relevant section of the law is subsection (a)(6) of 26USC408:
Under regulations prescribed by the Secretary, rules similar to the rules of section 401(a)(9) and the incidental death benefit requirements of section 401(a) shall apply to the distribution of the entire interest of an individual for whose benefit the trust is maintained.
Where: "the Secretary" is the Secretary of the Treasury (a member of the executive branch), section 401 of the income tax law (Title 26) is about Qualified pension, profit-sharing, and stock bonus plans, and subsection (a)(9) of it is about Required Distributions from those plans.
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Re: Is it safe to assume that RMDs won't deplete one's portfolio?

Post by tetractys »

FactualFran wrote: Sun Jun 04, 2023 11:12 pm
tetractys wrote: Sun Jun 04, 2023 8:51 pm This is a question about aggregating RMD's to deplete the inherited IRA faster. But according to the Q&A above that's not possible. I asked about access to the actual law and the poster stated the Q&A is the actual law (I think). Sorry I don't understand what you're asking about the disabled kid's 10 year rule or spousal RMD's.
The Q&A is from the regulations written by the executive branch of the government and describes details about how the executive branch applies the law. The law is written by the legislative branch (Congress). A relevant section of the law is subsection (a)(6) of 26USC408:
Under regulations prescribed by the Secretary, rules similar to the rules of section 401(a)(9) and the incidental death benefit requirements of section 401(a) shall apply to the distribution of the entire interest of an individual for whose benefit the trust is maintained.
Where: "the Secretary" is the Secretary of the Treasury (a member of the executive branch), section 401 of the income tax law (Title 26) is about Qualified pension, profit-sharing, and stock bonus plans, and subsection (a)(9) of it is about Required Distributions from those plans.
FF, Thanks. Sources are very much appreciated!
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