Asset Allocation In An IRA Earmarked For QCD’s
It would appear that under typical circumstances , bonds would be the preferred asset class for an IRA/401k for tax reasons. However, if I am planning to use my total IRA for QCD’s (to offset RMD’s after we need to start taking them), would equities be a better choice since taxes won’t matter to me or the charity when the $ is given to charities via QCDs? I realize there’s more risk going this route, but the QCD’s won’t start for another 9 years and span 30 years after that, so plenty of time to tweak or harvest gains into the money market fund as needed. Bottom line – the goal is to generate even more money for my charities than bonds can accomplish.
Permalink Submitted by Alan - IRA critic on Tue, 2021-08-31 14:51
You are planning a life span till 102? For the first decade of RMDs, you start at 3.65% of year end value and that rises to 5.15% for the age 81 RMD, so if your QCDs are not going to exceed your RMD and you are expecting a very long life span, I would retain a certain portion of the IRAs in equities, as that will likely generate more gains for both you and the charities. This decision is also affected by the amount of non IRA assets you have and how those are invested. If you have a large IRA balance, the 100k limit for QCDs will also come into play, but that limit may well be increased to 125k in the not so distant future.
Permalink Submitted by Blue_Sky on Tue, 2021-08-31 15:30
The QCD’s I’m planning start in 2030 (age 71) and go for 18 yrs (for me) and another 6 yrs for my wife, so total of 24 yrs (out to her age of 86). The model I’m using shows me when an RMD kicks in based on the QCD amount I enter, so I topped up the QCD annual amount right to the point where a small RMD appears.To your other comment, we have sufficient assets invested in a 70/30 mix to cover all expenses excluding the IRA’s, which is why we are using the IRA’s for charities and offsetting RMD’s. So if neither we nor the charity will see any tax impact, I was hoping we could accept more investment risk and have more to give. The IRA’s are currently at a 60% equities/40% bonds mix. Was wondering if , given our plan, we could go to a 90% equities/10% bonds allocation.