Apple in Your IRA: A Tax Bomb Waiting to Strike at Age 73

The IRS starts writing withdrawal schedules for traditional IRA and 401(k) owners when they turn 73. This is regardless of whether or not the owner wants to take cash out, holds Apple stock inside the account, or plans to hold every share until death.

The more a stock has appreciated, the worse the tax hit gets due to the Required Minimum Distribution (RMD) rule. The IRS uses the full account value on December 31 of the prior year to calculate the RMD, not the owner's cost basis.

For example, Apple stock has posted a price return of 1160.37% over the last decade. If bought inside a traditional IRA, that position is now a large number and the IRS uses it to compute the RMD. The current quarterly dividend yield of 0.32% will not cover the required withdrawal on a heavily appreciated position.

RMDs apply to traditional IRAs, SEP and SIMPLE IRAs, 401(k)s, 403(b)s, and 457(b)s but do not apply to Roth IRAs during the owner's lifetime. The SECURE 2.0 Act of 2022 pushed the starting age from 72 to 73 effective 2023, and it is scheduled to rise again to 75 in 2033.