RMD Hack

That is the Vixen 21 TD, "the sports car of motorhomes."

It looks like a cross between an EM 50 Urban Assault Vehicle (Stripes reference) and a DeLorean. No joke, one of the designers of the DeLorean was involved with the Vixen. It was fast for its time in the 80's. It was also designed to fit inside the typical garage at only 6'4" tall and 21 feet long. 

We talk frequently about optionality here. It is high up on my priority list and while a sporty number like the Vixen 21 TD having room for all your stuff and the kids might be a tortured analogy, I've had this search result open in a tab all week waiting for me to figure out how to work it into a blog post. 

The optionality we are talking about relates to RMDs. Anyone who is still working at their employer past RMD age does not have to take an RMD out of their 401k. If they are in that situation and have an IRA outside of their 401k, they do need to take the RMD. The 401k issue more complicated if you own more that 5% of the company so talk to an accountant. 

Even though the an employee is taking their RMD, they can still contribute to their 401k thus effectively offsetting their RMD up to the amount they can contribute. If someone's RMD is $38,000 and they contribute $20,000 to their 401k, then their "net" RMD would only be $18,000. They still need to make the full contribution and in a separate transaction take their RMD but the net effect is the same.

This can also apply to people who are self employed with a Solo 401k and have earned income. I've been thinking about this for my own circumstance. Some advisors never retire which is how I have been leaning. At this point, I don't know if I will have earned income during my first few RMD years but I might. 

If my early RMDs are somewhere between $30,000 and $60,000 and lets say I have $50,000 of earned income still, Gemini thinks I could contribute $41,000 to my solo 401k, offsetting some or all of my RMD. Again, these would have to be separate transactions, make the contribution and take the RMD. 

The tie in for optionality is relieving some of the burden from portfolio. This is what bridging as we've discussed it, does. The primary account, presumably a rollover IRA doesn't have to start generating an income at 65 or whatever age so instead of needing to do so for 30 years, maybe the bridge shortens it to 20 years when starting at 75 instead of 65. And maybe this lower or part time earned income for a couple of more years can shave two more years off that 20 year window which to my way of thinking preserves optionality for needing to maybe spend more on in home health or some sort of expensive medical treatment that insurance won't cover. 

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.