Does cash dividend received meet the RMD?

Submitted by Adman Gilly on Thu, 2012-12-13 10:05

I have 2345.34 shares / value $120,650.90 in my IRA and I am supposed to make compulsory withdrawal of around $5000 this year. I don’t want to make any redemption as there are dividends declared by the fund and I have opted for “cash” instead of reinvest 🙂
I have received around $4200 Income/ STCG/ LTCG dividend put together so far.

I am considering this as meeting my RMD and withdraw only $800?
Am I completely safe in taking this approach? Why not?

Regards,
Ad



Submitted by mk foss on Thu, 2012-12-13 17:42

Do you mean that you’ve already withdrawn $4,200 from the IRA this year? If so, you only need an additional $800 from the IRA.If no IRA withdrawals have been made in 2012, you need to take another action. You could have some of the shares transferred to you outside the IRA so that you wouldn’t lose the dividend but you would fulfill the distribution requirements.

Submitted by Alan - IRA critic on Fri, 2012-12-14 00:15

Another way of putting this is that for RMD purposes you have not received the dividends if you elected cash and the cash is still in your IRA. Your RMD must include the distribution out of the IRA to you or to your taxable account. That RMD could be done in cash or in kind, meaning that shares could be transferred from your IRA to your brokerage account for the RMD value if you wanted to. But the value of your RMD must be distributed OUT OF the IRA and show on your 1099R received the following January.

Submitted by Adman Gilly on Mon, 2012-12-17 12:22

Thanks a lot, Now I understand. Though I had not withdrawn any money but fund paid dividends which has met my RMD. I don’t have to specifically ask for withdrawals money (because my share balance has not reduced)…just $800 i have to redeem. 

Submitted by Alan - IRA critic on Mon, 2012-12-17 16:24

  • I am not sure you understand. You need to receive a total of 5,000 paid to you OUT OF the IRA to meet your RMD. Payment of the cash dividend cannot just stay in the IRA in the form of cash. It sounds like you now have 4,200 of cash in the IRA. If that is the case you need to sell enough shares (approx 16 shares) to bring the total cash up to 5,000 and be sure that at least 5,000 has been paid to you or transferred to your checking or taxable account to meet your RMD.

NOTE: If you just turned 70.5 this year, you can postpone all or part of your 2012 RMD to 2013, no later than 4/1/2013. If you do that you still must take your 2013 RMD no later than 12/31/2013,

Submitted by Adman Gilly on Tue, 2013-01-01 11:29

I received $4200 cash wired to my checking account (though I had not asked for a redemption, fund declared and paid dividend). 

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