More on Valuations of your MF investments

What’s your MF investment worth in your IRA?

I had a great response to my email last night on this subject so thought I should share some feedback I received regarding the valuation of of property in your IRA. The following was sent to me by a long-time Lifestyles PIG member and investor in many deals. They asked not to be named so while I thank them for the input I’m not going to give them the credit they deserve. It is quoted verbatim from their email.

Disclaimer: I still am not a CPA, financial adviser, tax planner, lawyer, doctor or anything close to any of these things. I’m just a sharing the information below.


A comment below – this is my understanding, so I would rather it not be distributed as coming from me.

One thing on IRA holders, you are correct the determination of the value does not have any impact, except when the age of the IRA holder has reached 70 1/2.  At this point the IRA holder are required to take minimum required distributions (MRD) based on the value of their holdings.  I am not sure how this impacts the reporting by the custodian, but the holder would need to include this computation in their overall valuation for the amount of their MRD each year.  I have plenty of IRA liquid assets to fund my MRD when a reach 70 1/2 several years from now.  But if a passive has only MF investments, since they are not liquid, they could encounter large tax liabilities and penalties not taking their MRD.

From the IRS:

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds

Retirement Topics – Required Minimum Distributions (RMDs)

You cannot keep retirement funds in your account indefinitely. You generally have to start taking withdrawals from your IRA, SIMPLE IRA, SEP IRA, or retirement plan account when you reach age 70 1/2. Roth IRAs do not require withdrawals until after the death of the owner.
Your required minimum distribution is the minimum amount you must withdraw from your account each year.
  • You can withdraw more than the minimum required amount.
  • Your withdrawals will be included in your taxable income except for any part that was taxed before (your basis) or that can be received tax-free (such as qualified distributions from designated Roth accounts).

Consequence for failing to take required minimum distributions

If you do not take any distributions, or if the distributions are not large enough, you may have to pay a 50% excise tax on the amount not distributed as required.