I want to push back a little on something.
Keeping your RMDs lower by intentionally choosing lower-return assets doesn't make much sense. Unless you have like a 100% marginal tax rate, you are still better off which higher returns, despite higher taxes paid in gross, because you still end up with more post-tax wealth.
Now, if you are for some reason wanting to use lower-expected-return assets for some other purpose, like say risk moderation, OK. But if you actually KNEW they would be lower return, you presumably wouldn't use them! The idea is if the risk materializes for the higher-expected-return asset during your investment period, then you will be better off with your choice, but that is because it will have returned more over that investment period!
So somewhat ironically, the typical real world reason you would want to use fixed income in something like a traditional IRA or 401K is because you want to establish a HIGHER floor under future returns, by the time you plan to actually need them for spending. This may also lower your expected (aka probablity-weighted average) returns, but that isn't a good thing, it is just sometimes an unavoidable consequence of a higher floor.
Again, I realize a lot of people here think in terms of first deciding they have to have X% in fixed income overall, and then next deciding it makes sense to try to lower future RMDs by putting those in traditional plans. But again, I really do think these people are getting things backwards.
Keeping your RMDs lower by intentionally choosing lower-return assets doesn't make much sense. Unless you have like a 100% marginal tax rate, you are still better off which higher returns, despite higher taxes paid in gross, because you still end up with more post-tax wealth.
Now, if you are for some reason wanting to use lower-expected-return assets for some other purpose, like say risk moderation, OK. But if you actually KNEW they would be lower return, you presumably wouldn't use them! The idea is if the risk materializes for the higher-expected-return asset during your investment period, then you will be better off with your choice, but that is because it will have returned more over that investment period!
So somewhat ironically, the typical real world reason you would want to use fixed income in something like a traditional IRA or 401K is because you want to establish a HIGHER floor under future returns, by the time you plan to actually need them for spending. This may also lower your expected (aka probablity-weighted average) returns, but that isn't a good thing, it is just sometimes an unavoidable consequence of a higher floor.
Again, I realize a lot of people here think in terms of first deciding they have to have X% in fixed income overall, and then next deciding it makes sense to try to lower future RMDs by putting those in traditional plans. But again, I really do think these people are getting things backwards.
Statistics: Posted by NiceUnparticularMan — Thu Jan 15, 2026 10:03 am — Replies 9 — Views 329