The math on a forced withdrawal is simple enough. The Internal Revenue Service says you must take it. You take it.
But what happens next — that is where the real calculation begins. Robert, a retiree past 70.5, found himself in that exact spot.
He called into The Clark Howard Show with roughly $500,000 spread across three retirement accounts. He did not need the money. Not a single peso of it, by his own telling.
Yet the government required him to pull a chunk out anyway. That is the rule for anyone over 70.5 holding tax-deferred retirement savings.
It is called a required minimum distribution, and it has been law for decades. The broadcast aired February 7, 2018. The problem has not gone anywhere.
For families across the Philippines and the wider Asian region, the scenario lands close to home. Overseas Filipino workers send money back. Relatives save.
Retirement accounts get built, often in U.S. dollars or through U.S.-based brokers. And then the calendar flips past 70.5, and the IRS sends a reminder that the money must move — whether the owner needs it or not.
Clark Howard gave Robert a direct answer. If the money was not needed for daily expenses, and if Robert did not want to give it to family or to charity, then put it into an investment account. Buy something like a total stock market index fund, Howard said.
Call it an inheritance asset for someone down the road. That is the core of the advice.
Money that sits idle in a checking account loses value. Inflation eats it. The purchasing power of every peso erodes year after year.
For retirees across Asia, where savings often have to stretch across borders and generations, that erosion matters deeply. Howard’s instinct was correct in principle: an RMD you do not need should go back to work. But the question behind Robert’s call is older than the answer.
Why force someone to withdraw money they do not want? The answer lies in the tax code.
Congress created tax-deferred retirement accounts to encourage saving. The trade-off was simple: you get a tax break now, but eventually the government wants its cut. The RMD is the mechanism that ensures the tax gets paid before the account holder dies and the money passes to heirs who might defer it further.
It is a blunt instrument. It does not care whether you need the cash.
It does not care whether you have other income. It does not care whether you live in Manila or Manila, Arkansas. The rule applies the same way.
For Robert, the solution was reinvestment. Not back into a retirement account — the IRS does not allow that for RMDs — but into a plain taxable brokerage account. A total stock market index fund.
Low cost. Broad diversification.
Something that can sit for years and compound. The advice has a logic that stretches beyond the individual case. For any retiree facing the same rule, the decision tree is short.
Spend it. Give it away.
Or invest it. The middle option — leaving it in cash — is the worst of the three. Inflation guarantees a loss.
The broadcast is years old now. Robert’s specific situation is long settled. But the rule remains.
Every year, another cohort of retirees turns 70.5. Every year, the same question comes up.
The same math applies. The same answer holds.
