hecfino
New Poster
Cash: $ 0.50
Posts: 2
Joined: 23 Mar 2013
Location: Texas
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| RMD from Inherited IRA |
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I am required to take a rmd from an inherited ira based upon a time line of 24 years. I am 59 and do not need the distribution. I still work and do not plan to retire for several more years. I am looking for a way to generate tax free income after retirement. I calculate a 4% distribution from investments plus SS for myself and spouse will generate 70,000+ in taxable income. We have a mortgage free home but it does need some sprucing up. My hope is to find an investment to generate tax free income to place the rmd into over the next 5/6 years. That would provide 125/150 k to invest. I currently have 225k in tax free funds available I can access as needed. Any advice would be appreciated.
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Sat Apr 06, 2013 7:57 pm |
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oldguy
Senior Member
Cash: $ 751.85
Posts: 3656
Joined: 21 May 2006
Location: arizona
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First, I would not limit yourself to tax-free income. I used tax-free bonds before I retired because I was in a high tax bracket. But now I use taxable bonds, their higher yields are net more than tax-free. And a caution - muni's are not very safe these days, lots of cities are going bankrupt.
We've been putting our RMDs into the SP500 Index Fund for the past few yrs - as you know, that's been a winner, it has returned about 20% per year for the past 4 years - but you can't count on it in the shortterm.
You're pretty young, a lot of years to left to build wealth (hopefully 25 more yrs). I would puit the RMDs into the SP500 Index and let it grow - after you retire just sell some when you need some (as opposed to setting up a 'salary' in retirement). We sell some SP500 and re-stock our checking account about twice a year. Or if we need a car or a trip, etc.
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Sat Apr 06, 2013 8:20 pm |
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clydewolf
Senior Member
Cash: $ 50.25
Posts: 248
Joined: 27 May 2012
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| Re: RMD from Inherited IRA |
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quote:
Originally posted by hecfino
I am required to take a rmd from an inherited ira based upon a time line of 24 years. I am 59 and do not need the distribution. I still work and do not plan to retire for several more years. I am looking for a way to generate tax free income after retirement. I calculate a 4% distribution from investments plus SS for myself and spouse will generate 70,000+ in taxable income. We have a mortgage free home but it does need some sprucing up. My hope is to find an investment to generate tax free income to place the rmd into over the next 5/6 years. That would provide 125/150 k to invest. I currently have 225k in tax free funds available I can access as needed. Any advice would be appreciated.
Oldguy is right, do not restrict yourself to tax free income. Each year we have our deductions and personal exemptions to deduct from our taxable income. On our 2013 tax return for a couple age 65 filing MFJ, we can exempt from tax the first $21,400 of income.
If you have a 401k plan available, the RMD can help you to maximize your contributions to your 401k plans. Also you can maximize contributions to your IRAs.
Another idea is to open an investment account with a mutual fund or brokerage. The long term capital gains are taxed at a maximum of 20%.
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Mon Apr 08, 2013 3:15 pm |
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