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After several years of RMDs from my rollover IRA, I’ve run out of cash to cover the withdrawal. In 2025 there is enough cash to cover about half the required RMD.
So, where does the rest come from? Which fund(s) do I sell? Here are the funds and their percentage of the account balance.
NOTE about these funds. There is no rhyme or reason. A logical strategy does not exist. Some resulted from the transfer of the account. We don’t use the funds to live on. The RMD will mostly be given to charity and our children. Whatever is left reinvested.
FSPGX 48%. FIDELITY LARGE CAP GROWTH INDEX FUND
FTHRX 18%. FID INTERMEDIATE BOND FUND
FIVFX 11%. FIDELITY INTL CAP APPRECIATION FUND
FBALX 8%. FIDELITY BALANCED
FSMDX 6%. FIDELITY MID CAP INDEX FUND
LEGAX <6%. COLUMBIA LARGE CAP GROWTH CL A
VHYAX < 6%. VANGUARD HIGH DIV YLD IDX ADMIRAL SHS
Why don’t you take it in kind and pay the taxes on the RMD amount from other sources? I always take my RMD in kind. If you like the funds, this allows you to keep them without selling any shares.
Hi RQ, this is a great in-kind summary from Schwab, I found it helpful.
https://www.schwab.com/learn/story/taking-kind-distributions-from-your-ira
My observations. The portfolio listed gives about a 1.3% yield. If you are using automatic stock purchase I would consider suspending that to release cash for the RMD.. The portfolio stock type is about 46% Growth (this includes about 26% aggressive growth and 6% speculative growth). It is also about 99% North American companies. I arrived at this by running the portfolio through Morningstar’s X-Ray tool (a free version is available). One thing you could consider is upping your percent of dividend paying companies. You could then use the dividends to build cash to feed a portion of your RMD, reducing the quantity of equities you would need to sell each year. Others have mentioned building a cash cushion or doing an in-kind distribution. Overall the portfolio has an average 0.21% fee ratio, not all that bad (about $2,100 annual on $1 million), but higher than equivalent ETFs. Why give it away?
Would putting your dividends into a cash account like VMFXX inside your IRA annually make up for your RMD withdrawals?
Yes,it helps. I stopped all reinvesting in the account to build up cash, but it won’t be enough by October or so.
Since tax season just ended, I will say, any fund that sends their statement out after March 15 is first on the chopping block no matter the return!
Thanks. Some good ideas
I would strongly recommend against getting financial (or any other meaningful) advice from AI. It’s far too easy to manipulate those results. AI is not nearly as useful as they want you to believe right now.
Liam – I know this is not the topic of the OP, but since I mentioned AI as an experiment to assist in an asset allocation, this article talks about how AI (ChatGPT) saved one persons life and doctors overlooked the symptoms.
https://nypost.com/2025/04/24/health/mom-of-two-credits-chatgpt-with-saving-her-life-by-helping-detect-cancer-which-doctors-missed/?utm_source=GetKim.com
True, all references say not to rely on it. But it can lead you to evaluate and start thinking about changes one might want to investigate further. The scary part is if someone uses an advisor and that advisor is now using AI. How would you know? It’s very easy to see when someone posts a comment that is AI generated. An investment recommendation is a different game.
As an experiment I asked AI to analyze your portfolio and suggestions to make it simpler and stronger. It takes a few steps. Then I told it to factor in age 83(?) and retired. It’s a long interesting report, but I can paste it here if you like, or try it yourself?
I just looked at the expense ratios (ER) on the holdings you listed.
FSPGX 0.03%
FTHRX 0.45%
FIVFX 0.86%
FBALF 0.48%
FSMDX 0.02%
LEGAX 0.98%
VHYAX 0.08%
Like others, I also like to think about my asset allocation (AA) across all of my taxable, tax deferred(IRA) and tax free(Roth accounts) of the combined accounts of both my wife and me so without such info I do not know what I would do given these holdings for the purposes of asset allocation.
The funds with the high expense ratios would be the likely candidates for the source of current RMD’s for me. I try not to own any funds with an ER > 0.20%.
You have stated in other articles that you have a large amount in tax exempt municipals. Those bond fund holdings being held appropriately outside of a tax deferred IRA would tend to make me favor going heavy on equity holdings inside the IRA all other things being equal in your AA. If you have Roth’s I would also be heavy equity there.
I know my wife would appreciate simplicity in my holdings if I end up being the first of us to die. I am moving in that direction of holding a single world equity index for my equity part of our AA and for the bond part of our allocation I am working towards half 10 year TIPS and half high yield treasury money market accounts. My wife is about four year younger than me while Connie is older than you and I have not really thought out what I would do differently given that difference.
I would note that I plan to not go for a longer duration above 10 years for TIPS as that would hopefully allow my children beneficiaries to hold the TIPS to maturity before having to withdraw under the SECURE (not SIMPLE as I originally posted, thanks Randy) act requirements should I die first. I do not currently plan to buy TIPS with a maturity beyond when my wife is age 90 so TIPS may not be as beneficial for your planning as I expect them to be for us.
I hope my thinking helps in your decisions.
Best, Bill
Bill, you mean SECURE act, right?
Yep, I was in a hurry and …
Thanks, Bill
Completely understand how you got there.
That said, it’s in an IRA, so all transactions within the IRA have no tax consequences until withdrawal. Therefore, there’s no reason to maintain this unless you like it.
What you have mimics an 80/20 where the equities are dominated by the S&P 500, a taste of Intl (eq and bonds). Let’s assume you want to maintain that but make it easier to deal with here’s my steps:
If you don’t want that and you want to keep your holdings (because we’re people after all, our desires do matter). Then I’d tell you to start by liquidating any fixed income holdings. At your age and with the cash flow you’ve established, you need precisely zero fixed income in an IRA. If these RMDs do fund current lifestyle income I’d have to rethink this part.
Why not set it up in buckets.
You can only get a rough estimate of what your future RMDs will be for the next 10 years because you don’t know what your year end balances will be.
First bucket being 2 years of cash (I would take it from your most appreciated asset-most likely bonds).
Second bucket 8 years of bonds.
Third bucket the balance of funds in stocks.
Annually rebalance with appreciated assets with recalculated RMDs.
I second the notion to decrease the number of funds you have. Maybe 2-3 bond funds: short term, short term tips, and or intermediate. A US or world stock fund and be done.
Agree with Adam. Can’t answer the question without knowing your asset allocation. Not only would I use the need to take RMD to rebalance, if necessary, but I would consolidate those funds. If you don’t need the RMD, why are you taking it now? I wait until October/November, after the end of the third quarter, so I don’t pay tax on any interest /dividends.
I always wait until then.
I’d suggest taking the opportunity to develop an asset allocation plan, based on planned use and timeframe need for the funds. Gotta ask yourself what your children use the money for – investing, living etc. Then you can come up with a plan.
I’d sell the one with the highest expense ratio – a quick look points to LEGAX.
Why not do an in-kind distribution? Then there’s no reason to sell, unless of course you are planning to need the cash. Plus you will get the stepped-up basis of the transferred securities in your taxable account.
There is an idea I was not aware of. Thanks.