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URL:  https://boards.fool.com/rmd-withdrawals-are-required-by-law-they-are-not-34161845.aspx

Subject:  Re: Backtest: Take RMD in Jan or Dec Date:  3/20/2019  12:45 PM
Author:  Rayvt Number:  92527 of 100111

RMD withdrawals are required by law. They are not required to be used solely for consumption. They can be used for entirely or partially for investment in a taxable investment account.

Yes. But as others have pointed out, if you do an in-kind transfer out and stay invested, it does not matter when in the year you do it. The return on the same investment will be the same whether it's in a taxable account or an IRA. The only difference being the different taxation of future gains.

The premise behind the question of the best time in the year to take the RMD withdrawal is the implicit assumption that the RMD will be spent.

Although I know from other posts that you like to have taxes withheld from your RMD withdrawals, is the tax column really meaningful?

No. But some people will complain if there isn't a tax column there. For purposes of comparison of the alternatives, the tax doesn't matter. The same tax applies to each alternative, so it cancels out.


...you like to have taxes withheld from your RMD withdrawals

Actually, I don't. (Although accurately actually, I don't do quarterly tax payments or regular withholding, I just do one large IRA withdrawal late in the year and have 100% withheld, in the amount that will satisfy the IRS Withholding Safe Harbor rule).
Money is fungible, and when you withdraw $X from an IRA you owe $Y additional tax. Doesn't matter which account I write the IRS check on, or what other income streams will be pushed into a higher rate --- the tax is owed because of the IRA withdrawal.


The last table in your comment where you attempt to adjust for consumption that there is an insignificant difference in the IRA accounts at the end of 31 years. The flaw in this table is that you've included income for the 101st year of consumption for those that withdraw RMD at the end of the year.

Indeed. I went back and forth on this, and actually changed the way I handled it several times. Decided that whichever way I presented it, somebody would rationally be able to complain about it.

The _right_ way to handle it is to do a phantom initial withdrawal of the first year's consumption amount in the "RMD at EOY" case. That way, at each Jan 1 each case starts out with that year's consumption amount in cash.
The way to do that is to start out the initial amount of the EOY block to be reduced by the amount of the first RMD.

Doing that changes the _amount_ of the final value (and total draws), but not the conclusion. EOY still has better total withdrawals and better final value. For 31 year period. For 20 year period there is a slight difference.


My overall conclusion is that it doesn't much matter when you take the RMD.
At age 90, one has a $10,821 RMD and the other has $11,281 RMD. That difference is bordering on insignificant.

What all this shows is that the claim that taking RMD on Jan 1 is *clearly* best...is wrong. It also shows that the fear about taking the RMD on Dec 30 is way overblown. So t's fear is groundless. So he can take comfort in that.
Primarily it shows that, even though taking the RMD in late December is better, the benefit is small.

So...take the RMD whenever is most convenient to you. There is no strong reason to shy away from taking withdrawals every month or so throughout the year, when you happen to need the money.
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