Should RMDs be taken Before or After Dividends
Currently I am receiving RMDs annually from my (indexed mutual fund) IRA, which pays dividends quarterly. My thinking is that RMDs should be withdrawn after (not before) the final dividend payment of the year. The dividend will be larger, because the withdrawal has not yet been made.
Typically, fund dividends cause share prices to drop. Since indexed fund prices are based on “benchmarks”, does that happen for indexed funds? If so, more shares would then be needed to meet the RMD & might reduce the final value of the account?
What’s the recommendation on that?
Permalink Submitted by Alan - IRA critic on Fri, 2014-07-11 22:24
Your account balance has no effect on your current RMD, which is based on the the year end balance of the prior year. If the market moves up the rest of the year after you take your RMD, the gains on your RMD will not occur and your year end balance will be slightly lower. But if the market moves down after you take your RMD, the losses on your RMD will not occur and your year end balance will be higher. Dividend payments can be looked at as gains for these purposes. Since the market including dividend payments result in gains more often than losses, the later you take out your annual RMD the higher your year end balance will be and therefore your RMD for the following year will be slightly more.