What If You Didn't Have to Sell Your Favorite Investments to Take Your RMD?
When it's time to take a Required Minimum Distribution (RMD), many people assume there's only one option.
Sell investments.
Withdraw cash.
Move on.
But depending on your situation, that may not be the only way to satisfy your RMD.
If you've spent years building your investment portfolio, you may not want to sell shares simply because the calendar says it's time to take a distribution.
Fortunately, there may be another option worth discussing with your financial advisor.
What Is an In-Kind Distribution?
An in-kind distribution allows you to transfer investments directly from your IRA into a taxable investment account instead of selling them first.
In other words...
The investment stays invested.
It simply moves from one account to another while still counting toward your Required Minimum Distribution.
That can be an attractive option for investors who believe in their long-term investments and don't want to sell simply to generate cash.
When Might This Make Sense?
Every retirement situation is different, but an in-kind distribution may be worth exploring if you:
Own investments you plan to hold for years to come
Don't want to sell during a market decline
Are already planning to rebalance your portfolio
Prefer to remain invested after satisfying your RMD
The value of the investments on the day they're transferred is generally what counts toward your Required Minimum Distribution.
A Simple Example
Imagine Chris owns shares of a company he's held for many years.
His Required Minimum Distribution is $12,000.
Instead of selling those shares and withdrawing cash, he transfers enough shares from his IRA to a taxable investment account to satisfy the required amount.
His investments remain intact.
His RMD requirement is met.
And he can decide later if—and when—he wants to sell those investments.
It's a strategy that won't fit every situation, but for some retirees, it's worth considering.
Four Questions to Ask Yourself
✓ Am I comfortable keeping these investments long-term?
✓ Would I rather avoid selling during today's market conditions?
✓ Does transferring investments fit into my overall retirement strategy?
✓ Have I discussed this option with my financial advisor?
If you answered "yes" to several of these questions, an in-kind distribution may deserve a closer look.
Planning Gives You More Choices
One of the advantages of planning ahead is having time to consider your options before deadlines arrive.
When you wait until the end of the year, it's easy to feel like you have to make quick decisions.
Starting earlier gives you the opportunity to choose the approach that best fits your overall retirement plan.
If you'd like another set of eyes on your plan, schedule a complimentary RMD Action Plan Session
Wisdom Financial is a DBA of John Boyer, Inc. Fee‐based advisory services offered through John Boyer, Inc, a Registered Investment Advisor. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP® in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
