Retired couple. 68. 69. We have sufficient income from pensions and social security for our living expenses.
We have Roth IRA's with $$$ due to many conversions over the years. Both consist of 60% VTI and 40% VXUS. We don't need to take withdrawals from Roths. We don't see the need to do any more Roth conversions (the math doesn't support it).
We have a brokerage account with $$$. With some cash there, we have money ready for extra spending and emergencies.
We are currently in the 22% bracket.
In my Rollover IRA, there is over 800K, exclusively in BND, but down about 5%. We don't need to use it now for any income,
but RMDs will start in 2029. With both of us alive, it appears that even with RMDs we will still be in the 22% bracket (or whatever
bracket is in effect for that range of income over time).
Any thoughts on how best to proceed with the IRA?
1. Reinvest the dividends and then sell lots each year for RMDs from 2029 on. But those lots may have losses.
2. Take the dividends in cash and let them accumulate in a money market fund (at Fidelity) currently over 4%. Then withdraw cash for RMDs.
3. Invest the dividends in some other bond fund or Treasuries each month. Sell lots or use maturing Treasury bonds for RMDs.
4. Withdraw the dividends monthly and keep the account balance from growing (will still keep us in the 22% bracket). Eventually sell lots of BND.
5. Sell BND at a loss and invest in some other fixed income product: cd's, TIPS ladder, balanced fund, etc.
6. Some combination of strategies. But we don't really need or want to invest in any stocks in this account.
I'm sure there are many Bogleheads with a similar situation. Part of me doesn't want to continue experiencing interest rate risk with the dividends reinvested. However, I know that over time the fund may heal itself of the current losses. But still, there are no guarantees that reinvested dividends won't experience losses over many years either. We don't generally like to sell for losses. (But have done some tax loss harvesting in taxable account before.) If there is an obvious answer to this situation, I haven't found it. Seems like a toss up.
We have Roth IRA's with $$$ due to many conversions over the years. Both consist of 60% VTI and 40% VXUS. We don't need to take withdrawals from Roths. We don't see the need to do any more Roth conversions (the math doesn't support it).
We have a brokerage account with $$$. With some cash there, we have money ready for extra spending and emergencies.
We are currently in the 22% bracket.
In my Rollover IRA, there is over 800K, exclusively in BND, but down about 5%. We don't need to use it now for any income,
but RMDs will start in 2029. With both of us alive, it appears that even with RMDs we will still be in the 22% bracket (or whatever
bracket is in effect for that range of income over time).
Any thoughts on how best to proceed with the IRA?
1. Reinvest the dividends and then sell lots each year for RMDs from 2029 on. But those lots may have losses.
2. Take the dividends in cash and let them accumulate in a money market fund (at Fidelity) currently over 4%. Then withdraw cash for RMDs.
3. Invest the dividends in some other bond fund or Treasuries each month. Sell lots or use maturing Treasury bonds for RMDs.
4. Withdraw the dividends monthly and keep the account balance from growing (will still keep us in the 22% bracket). Eventually sell lots of BND.
5. Sell BND at a loss and invest in some other fixed income product: cd's, TIPS ladder, balanced fund, etc.
6. Some combination of strategies. But we don't really need or want to invest in any stocks in this account.
I'm sure there are many Bogleheads with a similar situation. Part of me doesn't want to continue experiencing interest rate risk with the dividends reinvested. However, I know that over time the fund may heal itself of the current losses. But still, there are no guarantees that reinvested dividends won't experience losses over many years either. We don't generally like to sell for losses. (But have done some tax loss harvesting in taxable account before.) If there is an obvious answer to this situation, I haven't found it. Seems like a toss up.
Statistics: Posted by PSM — Mon Jan 13, 2025 1:39 pm — Replies 7 — Views 310