A retiree named Robert, already past 70.5, called into The Clark Howard Show with a problem the IRS created for him. He had to pull money out of his retirement accounts. He didn’t need it for a single peso of daily expenses.
The government forced the withdrawal anyway. Robert was splitting his required minimum distribution across three separate accounts.
They held roughly $500,000 total. He wanted to know what to do with cash the law demanded he take out but he had no use for right now. The broadcast aired February 7, 2018.
The underlying issue hasn’t aged. Clark Howard’s answer was direct.
If Robert didn’t want to give the money to family or charity, and didn’t need it for himself, he should put it into an investment account. Howard suggested buying something like a total stock market index fund. He described it as a great inheritance asset for someone down the road.
The advice was correct in principle. Money that isn’t needed for living expenses should be reinvested rather than parked in a checking account where it slowly erodes in purchasing power. For communities across Asia where every retirement peso counts, that distinction matters deeply.
But the advice came with a quiet tension that veteran financial observers would recognize. Howard was telling Robert to take money the IRS said he must withdraw, pay income tax on it, then put what remained into a taxable brokerage account.
The government forces the distribution. The government taxes the distribution. Then the retiree gets to keep what’s left and invest it.
This is the mechanical reality of required minimum distributions for retirees past age 70.5. The IRS doesn’t care whether you need the money.
The rule exists to force tax collection on decades of tax-deferred growth. Robert had been sheltering that money in retirement accounts for years. Now the tax bill was coming due, whether he wanted it or not.
For families across the Philippines and the wider region, where remittances and retirement savings often cross borders, this question hits close to home. Many overseas Filipino workers and their relatives face similar dilemmas. They are forced to move money they don’t yet need, simply because of age-based rules.
The core mechanic is straightforward. An RMD you don’t need should go back to work rather than sit idle and lose value to inflation.
Howard’s instinct was sound. A total stock market index fund is a reasonable choice for money that will sit untouched for years, possibly decades, before being passed to heirs. But there is a tax cost to this strategy that the radio segment’s brevity likely didn’t allow Howard to fully explore.
Every dollar Robert pulls from his retirement accounts is taxed as ordinary income. Every dollar of growth in that taxable brokerage account will be taxed as capital gains when sold.
The money inside the retirement accounts would have grown tax-deferred until withdrawn. Once withdrawn, that tax shelter is gone forever. Robert was splitting his RMD across three accounts.
That suggests he had accumulated retirement savings in multiple jobs or with multiple institutions. The $500,000 total is not a vast fortune. It is a sum that must be managed carefully to last through a retirement that could span two or three decades.
The choice Howard gave Robert was limited. Give it to family.
Give it to charity. Keep it for yourself. If you keep it, invest it.
The advice was practical. It was also a reminder that the tax code creates problems for retirees that financial advisers can only solve, not prevent.
