Halls of Shrewd'm / US Policy❤
No. of Recommendations: 2
I take mine early in the year so that it is close to the date (12/31) that it is based on. If the market goes up over the course of the year, I don't earn money on what I've withdrawn, but if the market goes down, I come out on the winning side of the bet. In the past couple years I've been on the losing side of the wager. I think that will be changing over the next 2-4 years.
No. of Recommendations: 7
On average, the market is higher at the end of the year than the beginning.
I did a quick price-only check, 1985-2023 (39 years).
Of course for total return you also need to add the dividends.
Average price gain from Jan 1 to Dec 31 was 9.3%.
28 years were higher at end-of-year
11 years were lower.
The issue with taking it late in the year is if the market goes down so much that the RMD is a large percent of the diminished account. The 2 largest Jan-Dec losses were -24% and -37% (price-only). The 2 highest were +34% and +31%.
11 of the 39 were +20% or more.
If you take your RMD in-kind by transferring investments from the IRA to a taxable account then it doesn't matter when you do it, because the investment will grow the same no matter which account it is in.
There's a couple of sequencing rules to keep in mind.
You must take your RMD before you can do Roth conversions. (For those who still think Roth conversions are a good idea.)
Qualified charitable distribution (QCD) is only non-taxed if they are RMD.*
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*(controversial & unclear)
"A popular recommendation is to execute a QCD early in the year to avoid any conflict with the “first-dollars-out rule.” The first dollars withdrawn from an IRA are deemed to count toward the RMD. Once an RMD is taken, it cannot be retroactively offset with a later QCD."
No. of Recommendations: 0
Thanks for coming up with the numbers. We do our QCDs out of my wife's IRAs.
No. of Recommendations: 2
My wife and I tend to take ours in November to leave time to fill in any shortage in the original estimates of what's due (and we're cautious about cushions--nothing is complete until it's all complete, and gremlins exist). Exceptions are similar to the one this year: large household expense, so I'll be taking a cash-centered partial RMD out of mine next month (or the following) to cover that cost.
Eric Hines
No. of Recommendations: 5
My folks typically take their RMD in December to maximize time value/ growth of the account and then direct that RMD to help cover their taxes due in April.
