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(239) 418-1939
10181 Six Mile Cypress Parkway, Suite B

Fort Myers, FL 33966

Are Your Allocations Right for RMDs?

There is an ideal order in which to pull from retirement accounts when taking IRS Required Minimum Distributions (RMD). The goals, which often go unheeded, are to help minimize taxes, try to minimize taking principal, and earn as much as possible. These goals are easy enough to understand, but there are many factors to consider. It takes a well-planned strategy to ensure the interest and dividends you’re generating from your savings and investments are sufficient to cover your RMDs, keep your tax bill at a minimum, and satisfy your other expenses throughout retirement.

As you may know, RMDs are distributions the IRS requires you to make on your retirement savings each year after you’ve reached age 73. The amount changes each year in conjunction with your life expectancy and the balance of your IRAs and other qualified plans as of December 31 of the preceding year.

The Reverse Mortgage Analogy
Ideally, an asset allocation for taking RMDs should be able to generate high enough earnings to satisfy your required withdrawals without eating away at the initial investment. This calculates to be at least 3.7% in combined dividends and/or interest.1 If your interest and dividend income aren’t sufficient to cover your RMDs, then the distributions will most likely have to come from principal. Why is that so bad? Well, with average life expectancy rates today higher than they’ve ever been, most people need to plan for 30 years of retirement. That being the case, spending any principal at all, especially in the early years of retirement, can negatively impact all the remaining

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