You are taking RMDs from your IRA. Either you are 70-1/2 or you have a beneficiary IRA and would like to make it last, so you are taking the Required Minimum Distribution each year.
Each year you look at your retirement portfolio (the stuff in your IRA, but portfolio sounds very intelligent) and need to decide what you’d like to sell before the end of December. Does that sound like your December RMD each year? Say you have to take out $10,000. If you have mutual funds, you can usually give an exact dollar amount to sell and withdraw that money, but what if you have a mix of stocks and are have a tough time picking one to sell? Wait a second – Did you know that to take your RMD, no sale is required? The process is simple, you advise the broker to move shares of stock from your IRA to your non-retirement account, and the shares are moved “in kind,” i.e. as shares of stock not as cash from a sale. So if that IRA has Apple (around $500 per share) and your RMD is $10000, you just move 20 shares. The broker will report the transfer as an IRA distribution. This amount will also become the basis for the shares of stock. In this example, if the shares traded for a few dollars less than the $500, you might have to take out some cash as well, but this strategy will help avoid the commission of a sale each year, as well as the forced sale of shares you wish to keep.
Of course, this strategy only benefits you if you have other funds available to pay your tax bill each year. Even with that in mind, if your IRA has a mix of stock and cash you might be able to take an in kind stock distribution and a bit of cash to pay that tax bill.
If you plan to use this strategy or have any questions that are related to IRAs, drop me a note, I’d love to hear from you.