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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75642  
Subject: Re: Wade Pfau: 3% is the new 4% SWR? Date: 3/3/2014 6:21 PM
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Donna

This year, I plan to convert the remander of the stock in my SEP-IRA into my Roth and will pay the taxes, thus eliminating my need to sell any stocks for the RMD. Why? The stocks are good dividend payers and right now, I am reinvesting the divies.

Note...there is no requirement that you withdraw the RMD from the IRA and go spend the money. In fact, an RMD doesn't have to change anything except your tax bill and where you are holding the stocks in question. Your allocation can remain unchanged after the RMD.

For example, lest say you have 500 shares of JNJ in your SEP that you are collecting dividends on and wish to continue doing so. For your RMD, you can calculate how many of the shares of JNJ equals your RMD...lets just say thats 80 shares of JNJ. So you can ask that your broker do an 'in-kind' transfer of these shares from the SEP to your taxable account. The amount of the transfer (your RMD) will be reported that year on the form 1099R, so you'll have to include it as income for the year as you normally will for an RMD, but your holdings of JNJ and the dividends it pays have not changed....although now the 80 shares of JNJ in your taxable account will get favorable tax treatment....in the SEP the JNJ dividends you withdrew were taxed as ordinary income.

BruceM
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