Can you use dividend distributions from an IRA to satisfy an RMD?

Is it acceptable to use dividend distributions from an IRA to satisfy an RMD?

IRAs
Answers
Sort By:
Most Helpful
4 weeks ago
100% of people found this answer helpful

Yes, this is certainly feasible. At Schwab, for example, you can fill out an IRA distribution form instructing the custodian to sweep dividends, capital gains, and interest to a taxable account. Any of these automatic distributions are counted toward your RMD. It's a fire and forget mechanism.

There is a downside, however. The tail can start wagging the dog. RMD calculations typically require a substantial fraction of your assets be distributed. To satisfy the RMD in its entirety, you might be tempted to skew your portfolio to securities that generate high income. This is not a good rationale for portfolio construction. Commissions on security sales are usually inexpensive if you shop around. Many custodians have no transaction fee funds that are pretty good. Secondly, it's typically a good idea to sell one or two positions a year to rebalance your portfolio. Selling US stocks after their big run up in 2016 might be a good strategy with your IRA. My preference is to execute RMDs once a year for clients and to use this occasion as an opportunity to rebalance through asset sales.

2 weeks ago
4 weeks ago
2 weeks ago
4 weeks ago