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I have two accounts for investments--the cash from one is invested in stocks and the other in a fixed-return product.

I need to begin taking a regular monthly withdrawal on these accounts. Does it matter which account that withdrawal comes out of?

My sense is that it should come from the fixed rate account, since equities are volatile. But I'm getting advice from a family member to take it from the equity fund since it has had a decent YTD return, a take from the fat approach. Which is right, or does it even matter?

MrChrister
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Faisal
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    When you say "does it even matter" - does it even matter for what? Are you talking about RMD and asking whether it makes a difference from which account you withdraw to meet the RMD requirements? – littleadv Oct 08 '13 at 19:30
  • Are these special account types e.g. retirement, or else plain investment accounts? Tell us more about the kind of accounts and where you are, because taxes are a factor. – Chris W. Rea Oct 08 '13 at 21:18

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In general, one should look at their allocation and adjust it on a regular basis, annual is a typical choice. Withdrawals are cash, of course, and after a year of withdrawals, you'd look and see what needs to be done to re-balance.

Keeping two accounts is fine, but you still have one portfolio. And depending how the stock account is invested, it will accumulate cash from the dividends.

There's no magic way to do this. And no magic mix, except, perhaps, for the mix that lets you sleep best at night. As you withdraw your cash, the stock % will increase a bit, as it will 2/3 of the time, when the market rises. In down years, your reallocation might be to purchase more stock.

Note - littleadv asked an interesting point of clarification, worth addressing. Some people are confused regarding RMDs. Obviously, if you need spending money, you can't spend shares of Apple. But, to satisfy your RMD, you can withdraw shares 'in-kind' which means taking the stock as an RMD. Say your IRA happens to have a mix of stocks and your RMD is $5000. You can transfer 10 shares of Apple from the IRA to the non-retirement broker account, and once it clears, you'll see the value it was transferred at. You then might have to take a few hundred dollars more to meet the exact RMD, or you might have gone a bit over. Now you'll treat the RMD as income, and will need to pay tax out of your cash account.

JTP - Apologise to Monica
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  • But whether the RMD requirement can be satisfied by taking distributions from a single account when you have several? – littleadv Oct 08 '13 at 23:07
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    Yes for (non-inherited) IRA RMDs, no for 401(k)s. i.e. the IRAs are combined, but the 401(k)/457, etc, each have its own RMD. – JTP - Apologise to Monica Oct 08 '13 at 23:33
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    To clarify JoeTaxpayer's comment, each 401(k) (from a single employer) that you have is treated separately and you must take an RMD from each. However, if that particular 401(k) is invested in different mutual funds or other assets, you can choose which assets will be sold to satisfy the RMD. If you have noninherited IRA accounts with, say, Vanguard and Fidelity, each will send you a letter reminding you that your RMD is $X and $Y$ based on what they hold, but you can withdraw $X+$Y all from Vanguard and nothing from Fidelity or any other split, as long as a total of $X+$Y is taken as RMD. – Dilip Sarwate Oct 09 '13 at 01:36