Retirement Savings and Benefits
Questions and comments about IRAs, 401k accounts, social security, and other forms of retirement savings and benefits.
RMD in form of Stock Transfer
Posted by: 19gt52, August 16, 2017 03:45PM
I have a non-Roth IRA. Each year I take my MRD from the IRA's internal money market fund, and at the same time have the brokerage withhold what I estimate to be: the full amount of my taxes due for current year.

This year, I will have to either liquidate stocks inside the IRA, or do an in-kind stock transfer to my taxable brokerage account. I understand the cost basis treatment of the relocated stock, but....

If I do the in-kind transfer, do I lose the opportunity to have brokerage withhold from the MRD an amount which will satisfy the IRS requirements for "paying as you go?"

[I do not have any earned income from which to withhold money, nor do I pay Estimated Taxes during the year]

thank you,


Re: RMD in form of Stock Transfer
Posted by: Alan S., August 16, 2017 04:20PM
The withholding must be in cash. Therefore, you should sell enough investments in the IRA to cover your withholding before requesting the distribution.

An in kind transfer to your taxable account will likely require partial shares to be transferred if you do not want to slightly exceed your RMD amount. The value of these shares will continue to change between the time you request the distribution and when it is processed, so you will need to provide a detailed request of what holdings and number of shares to be transferred to meet your RMD amount in excess of the cash withholding. Such request might take the form of "transfer x shares of a, y shares of b and enough shares of c to add up the RMD amount".

You probably already know what withholding %s your custodian allows.

Re: RMD in form of Stock Transfer
Posted by: 19gt52, August 16, 2017 04:51PM
Thank you -
I understand that the withholding must be in cash, and if I read you correctly, there is no way to transfer stock as "in kind" to my taxable account AND THEN take CASH from a money market account in my taxable account to satisfy the withholding.

In that case, I might as well forget the transfer if I have to sell shares (to raise cash), and do the withholding while still under the IRA umbrella.

Re: RMD in form of Stock Transfer
Posted by: Alan S., August 16, 2017 11:33PM
Yes, the withholding must be done from the IRA distribution. Of course, I do not know how much you need withheld to meet your safe harbor (usually 100% of your tax liability for the prior year) in relation to the amount of the RMD since that depends on the balance in your IRA.

So if the withholding is a large portion of your RMD, you might as well just sell in the IRA and generate enough cash for both the transfer AND the withholding.

But if the withholding is a small portion of your RMD, then you only need to sell enough to fund the withholding and could do an in kind transfer of the remainder of your RMD to taxable.

In conjunction with the transfer, you might also want to retain assets taxed as ordinary income in your IRA (eg bonds, REITS, CDs) and transfer or rebuy equities in taxable where dividends and LT gains will be taxed at the lower LT CG rates.

Re: RMD in form of Stock Transfer
Posted by: 19gt52, August 17, 2017 12:25AM
Excellent points - well taken.

In my case, the withholding percentage usually runs in neighborhood of 30% of the MRD, so neither a small, nor a large portion, IMHO.

I'll just have to make the call myself.

Thanks for the words of wisdom.

(you should be moonlighting as an investment counselor)

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