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+--- Thread: Traditional IRA and the RMD (/showthread.php?tid=329)
Traditional IRA and the RMD - Dividend Watcher - 12-22-2013
I've been working on an SA article about the Required Minimum Distribution (RMD) in an IRA and strategies to maximize after tax income and to minimize depleting your principal. My first version was rejected because it was not "actionable and useful to the reader". Yet there was incredible interest in the comment stream for Bob Wells article on high income for those in retirement (too busy to look up the link right now).
In my first iteration, I used a generic portfolio value and various growth rates (yield + capital gains) and found that unless you can maintain a consistent portfolio value growth rate over 10%, it won't be long, once you reach age 70.5, before the RMD will exceed dividend returns and you need to withdraw capital to meet the requirements. In other words, you can't just withdraw and live off the dividends. You need to touch your capital also. My "at first glance" instinct is I need to start recharacterizing some assets into a Roth to avoid an onerous income tax bill in retirement. There's no way I'd be able to afford the taxes moving the bulk of my IRA to a Roth in only a few years now. My marginal tax rate would move up to the 28% bracket in short order.
For the second iteration, I've developed a more detailed, real-life portfolio but it has been much harder to model dividend growth and capital growth along with the RMD requirements in a spreadsheet simultaneously. There's just so many moving parts. My goal was not only to come up with some reasonable strategy but to build a spreadsheet anyone could download and enter their own portfolio just to see where the numbers are going but about now I've reached writer's block.
I'm not sure what insight I'm looking for yet but would appreciate any of your thoughts.
RE: Traditional IRA and the RMD - Kerim - 12-22-2013
Wow, I'm surprised to hear about the rejection. I feel like half the articles I read over on SA now are not "actionable or useful."
Sounds like a pretty intense project, and will be useful to you whether or not it gets published. I'm not sure I can offer any help, as it is not a topic I've thought too much about. If you want to share the spreadsheet, maybe some of us could take a look and see if we have any insights to offer?
RE: Traditional IRA and the RMD - Be Here Now - 02-14-2014
I can help with your second iteration. I have developed a spreadsheet that models RMDs combined with total return growth, and lets you simultaneously model withdrawals based on the mechanics of the 4% rule. I did not try to separate capital growth from dividend growth because the RMD rules are based on total account value. If you are interested, post your email here or you can use a private IM on Seeking Alpha - I have the same moniker there.
RE: Traditional IRA and the RMD - Dividend Watcher - 02-14-2014
Be Here Now, your first post here. So glad you joined in.
Appreciate the help. I'll try the PM method here. I've let it slide a little because there were too many moving parts in my life for the last couple months but want to get back into it again.
P.S. Why don't you introduce yourself in the introduction section?
RE: Traditional IRA and the RMD - Be Here Now - 02-15-2014
Introduction section? Don't see it.
RE: Traditional IRA and the RMD - Dividend Watcher - 02-15-2014
Go to the board's home page, then scroll down. There's an "Other Dividend Growth Forum Stuff" section and in there is the "Introduce Yourself" category.