Bruce has been taking required minimum distributions (RMDs) from his retirement accounts for four years, and he’s concerned that the amount of required withdrawals will lead to premature asset depletion. What can he do?
One quick way to look at RMDs is that they are required distributions, not required spending. While Bruce is required to take withdrawals each year, he’s free to reinvest the amounts. In some cases, he can put the funds into a Roth IRA, and he can always put the RMD proceeds into a taxable brokerage account.
Total portfolio withdrawals matter to portfolio sustainability, so if Bruce is concerned that his RMDs are too high, he can hold back on withdrawals from his non-RMD-required accounts.
And unless Bruce’s goal is to leave substantial assets to charity or his heirs, withdrawals should step up as the years go by and life expectancy declines. RMDs start at 3.6% but ramp up to nearly 12% by age 95. Since these percentages may seem high compared to the 4% rule some retirees are familiar with; Bruce should consult with his financial professional to find the best solution for his situation.
Client Profile is based on a hypothetical situation. The solutions we discuss may or may not be appropriate for you.