How Do I Satisfy My RMD When My IRA Investments Are Illiquid?

Some IRA assets are much harder to liquidate; distributing the RMD in shares of the investment may also be complicated or not possible. Despite these issues, there is no IRS exception to the RMD requirements for illiquid assets. Consider these possible solutions:

  1. Take From One Account- RMD rules allow you to aggregate your RMDs from your IRAs and take the total amount from one account. So, if you have more than one IRA, you can calculate the RMD amount for each IRA and add them together. If you have one IRA that is illiquid, you could simply take the RMD for that account from another IRA. Remember, there are limits here. You cannot satisfy your RMD for your IRA from a workplace plan or a Roth IRA. Note: You cannot aggregate your owned IRAs with those of your spouse or with IRAs that you have inherited.
  2. Add a Cash Contribution- If you are eligible to inject some cash into an IRA in the current tax year your RMD is due, you may use these funds to satisfy your RMD. The SECURE Act makes this possible by allowing IRA contributions at any age, but you would need to have earned income and you would be limited to $7,000.

To avoid last-minute mistakes and stiff IRS penalties, it is important to plan ahead. Talk to your financial advisor or tax attorney to understand how to fulfill your RMD requirements and what is best for your situation.

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