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RMDs Don’t Have to Be Taken in Cash

Roseanne Cash


It’s a little-known fact that distributions from an IRA  or a Qualified Retirement Plan can be taken in kind, rather than in cash.  You can in any circumstance take distribution from the account of stocks, bonds, or any investment that you own, just the same as if it were cash.

The downside to this is determining valuation for the distribution.  You could value the distribution on the day of the distribution by opening price, closing price, average price, or mean between the day’s high and low prices.  Where you really get into trouble is when the security that you own is very thinly-traded, such as a small company or very infrequently-traded bonds.  These can be very hard to value on the date of distribution, and as you might recall, the value of a distribution for Required Minimum Distributions (RMDs) must be valued appropriately in order to ensure that the minimum has been met.

In general, it is probably in your best interests to take the distribution for RMDs in cash – so that valuation isn’t an issue at all.

There Can Be An Upside

In some cases, especially where the securities held are more easily valued, it can be beneficial for you to take these distributions in kind.  By doing so, you will have the advantage of remaining fully-invested (no lag time between selling the holdings in one account and purchase in the new account).  Then there’s the obvious situation where you are hoping to use NUA treatment – those distributions must be in-kind (but NUA treatment doesn’t generally apply with RMDs).  You also would achieve the benefit of not having to pay commissions on the sale and purchase of the securities, if these would happen to apply in your case.

Another situation where taking a distribution in kind can be useful is precisely the one we described above as a negative.  If the security is hard to value due to some limiting factor such as light trading, you could take a distribution of an applicable percentage of the security, along with cash representing the appropriate percentage from the remainder of the account and thereby satisfy the RMD.  Later, when the security becomes more easily valued (such as maturity for a bond) you can sell the security for cash as needed.

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  1. Robert Hardekopf says:

    I’m getting your email twice, so I unsubscribed from the second one. Please continue to send me ONE email at my email address above.

    1. jblankenship says:


      Sorry about the duplicate email. You may need to sign up for the email again as I don’t see your address in the list currently. If you have two email addresses, you might check to see if you’ve used both addresses to sign up (I’ve done that before!).


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