Q & A
My wife and I have a number of retirement accounts. As we are of age, we are required to withdraw a minimum amount from each of them. Concerning my wife’s accounts, is it sufficient to withdraw an amount equal to the minimum for all her accounts from just one account? My reason for asking is that one account gets a high return and the other has a very low return. Further, would a large withdrawal (based on my required withdrawals) from her account cover the withdrawals that I am required to make, or must I withdraw from my accounts alone?
Answer: You can take a single distribution from one of your wife’s individual retirement accounts to satisfy her total required distribution — provided they are all IRAs and not 401(k) plans — but you can’t double up as a couple, because IRAs are for individuals, said Maria Erickson, a financial planner and principal of Freedom Financial & Business Planning in Tampa, Fla. Your characterization of her accounts’ returns was puzzling. Is it by design that one earns a high return and the other a “very low” return? Was it something to do with your risk tolerance or is that simply how things are working out?
For her retired or soon-to-be-retired clients, Erickson typically builds some cash into their IRAs as the required withdrawals approach after age 701/2. This way, they won’t be forced into selling stocks into a bad market to meet the minimum, she said. That comfort level gives clients some running room to invest the rest of the portfolio according to their risk tolerance and income needs, she said. Alternatively, sometimes clients have too much money invested in a certain asset class. If so, she advises them to use their required distribution to lighten up on those assets. And as long as you are delving into your retirement accounts, you might as well check out how much you are currently paying in fees to manage the money, she said. “Look under the hood and see what kind of fees you’re paying and whether there would be an advantage.
Source: Chicago Tribune Company, LLC – October 4, 2013