Income generated in IRAs to serve as RMDs
I hold fixed income securities in my traditional IRA accounts that generate cash that I can use to either re-invest of withdraw. I will be required to start RMDs in 2 years. As I understand it, as long as the FI securities generate cash sufficient to meet RMD requirements, I won’t have to sell any of the securities to meet RMD requirements. The securities can remain in the IRA accounts generating cash. Is that correct? Do you see any disadvantages of such an arrangement?
Many thanks!
Permalink Submitted by Alan - IRA critic on Thu, 2013-06-13 22:35
You are required to distribute your RMD in cash or in kind. So if your holdings kick out enough cash, you can use the cash to meet your RMD. If they do not produce enough cash, you can make up the difference by distributing shares such that the cash plus the value of the shares adds up to your RMD amount. The shares would be transferred into your taxable brokerage account, where they would have basis equal to their value when distributed from the IRA.