In-Kind RMD Strategy [video]
/transcript
I'm working through RMDs for clients to make sure that they're done by the end of the year. These are required minimum distributions from tax-deferred accounts.
What many people don’t realize is that we can actually do in-kind distributions to satisfy that RMD.
For example, taking it from the IRA and moving it to your brokerage account.
The more traditional way of doing it is if you need to take a $10,000 distribution from your IRA, just sell $10,000 worth of a mutual fund or ETF, transfer the proceeds to your checking account - and you're good. That makes sense for people who are retired and already living off of their portfolio.
But for people that are still working and are not using that money to live on, what you can do instead are these in-kind distributions.
Instead of selling that $10,000 of a mutual fund, we can move $10,000 worth of those shares and transfer them to the brokerage account.
It is still a distribution, you'll still be taxed on it, you're still satisfying your RMD, but it's more efficient. We're not making those two trades, so if there are any fees associated with selling / buying, you're avoiding that. You're also not exposing yourself to any market fluctuation if there's a lag between those two trade days. It's just another option to consider that I will do for my clients that don't need to live off their RMDs but have to take their distribution by the end of the year.
Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.
Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.