RMD anyone?

[Rich Engelhardt]

I thought wading through the Medicare mine field was bad....

I googled "required minimum distribution" to find out how I should calculate it.

Google referred me to IRS Publication 590-B where I was to find out from the tables how to calculate what I had to withdraw.
In typical IRS fashion, they have around 800 printed pages that tell you more than you ever thought it was possible to say about how to figure out what your RMD is - - but - - tell you nothing.


Enter - - drum roll please.....

AARP!

https://www.aarp.org/work/retirement...on-calculator/

A little bit of finding out balances and plugging them in and Voila! Easy Peesy..

I will quit fighting my wife over the AARP membership now.

[Ken Fitzgerald]

When my wife gets home and I show her this post, I will have to quit arguing with her about our AARP membership too! I hope their calculator is correct! LOL!

[Earl McLain]

Many of the brokerage companies have them on their websites as well. Fidelity, Schwab, TD Ameritrade and BankRate come to mind.

AARP--i had to buy a membership to get $10/month off my Medicare Supplement...still not a believer in them, but it saved me a net $100/year on that. Checked their travel deals for a recent trip--did much better at hotels.com and car rental through Southwest Air's site. Probably would have cost an extra $250-$300 on a 4 day trip to use AARP.

[Patty Hann]

I thought wading through the Medicare mine field was bad....

I googled "required minimum distribution" to find out how I should calculate it.

Google referred me to IRS Publication 590-B where I was to find out from the tables how to calculate what I had to withdraw.
In typical IRS fashion, they have around 800 printed pages that tell you more than you ever thought it was possible to say about how to figure out what your RMD is - - but - - tell you nothing.


Enter - - drum roll please.....

AARP!

https://www.aarp.org/work/retirement...on-calculator/

A little bit of finding out balances and plugging them in and Voila! Easy Peesy..

I will quit fighting my wife over the AARP membership now.

I googled "RMD calculators" and got a boatload of hits (including AARP)... I can't believe that AARP's calculator is the only one of all those Hits that is accurate and/or easy to use.
(Just my opinion as I haven't checked all of them but I did use a few of them over the past year and they gave consistent results)

[Jim Koepke]

I didn't bother with the RMD calculation. Set up an automatic withdrawal to auto-deposit for a truck payment. That was hard enough since half the time they subtract from the entered amount for federal tax withholding. This time they didn't so more comes my way that was planned.

Terrible inconvenience getting more money that was planned.

Somehow it still didn't meet the RMD so after the fiscal year they sent me a check for the difference, Surprise, surprise, surprise!

More unplanned on money to deal with.

jtk

[Earl McLain]

Most IRA custodians provide an option to automatically calculate & distribute RMD funds. This is a convenient option for those who don't have a need to take withdrawals during the course of the year, and may provide "plausible deniability" in the event a smaller than needed amount is withdrawn--though the taxpayer is still responsible for the taxes and penalty on the under withdrawal.

And no surprise that the on-line calculators are consistent...it's really nothing more than dividing the prior year's end balance by the number of years in the appropriate life expectancy table, i'm not recalling the name of that table at the moment. Been a few years since i've had to help a client, and i'm still a few years before i have to start--so i'll forget more in the interim!!

[Brian Runau]

Years ago we hired an Ex IRS guy to do our taxes. He came to the house and as very reasonable. Nice guy did a great job and our taxes weren't complicated. He retired right before the pandemic so we were left trying to find someone during the pandemic. We did and they did a good job. We needed to discuss Roth conversions to try and see how practical it would be to do in order to leave less taxes for those we leave whatever money is left to.

Young lady wanted us to come to the office and we did, she was late for the appointment. She was prepaid, hadn't done the work prior to the meeting and kept us waiting while she did. You never know, children, family stuff, etc... life happens but no one said a word to us once the meeting time had passed and they weren't close to home for us.

So we started looking for a new firm to advise on tax planning, RMD's, taxes, etc... One guy wouldn't let me tell him what I wanted to come in for and preplan so we could discuss during our meeting and wanted a $400 deposit before he would meet with us, another group wanted to put us on monthly payments that would have been $1500/year. 3rd guy was reasonable and said I could send him info before the meeting so we could discuss. We showed up for the meeting and he hadn't read or even remembered the info I sent in the e-mails. Actually e-mailed me after the meeting and said, "We didn't know what you needed." I am a speech major and retired salesman, pretty good communicator. So we plan to stay with 3rd guy since we have time invested, but after taxes are done, start over. I just don't want to do them, I can, but concerned about my wife if/when I pass. Want her to have a relationship with someone who can do this for her, if need be. Brian

[Roger Feeley]

We have a financial advisor for these sorts of decisions. When we get old enough for RMD we will probably just move money from the IRA to a regular account. We are very fortunate to have a pension from my wife’s 30 years in education. 401Ks are fine but a fixed benefit pension is a real game changer. Back when I was teaching we had a number of retired military who had put in their 20 and had a pension. They told me that the pension was how they could afford to teach.

[Ralph Okonieski]

We just had a meeting with our advisor. We have been asking questions about RMDs simply as knowledge as we are a year away from that momentous occasion. Our question to him was regarding withholding taxes. His answer was a little surprising leading me to do further research that validated what we learned.

So, when taking RMDs, are quarterly estimated payments still required if having withholding tax from RMDs. According to him (and my research), it is not necessary to pay estimated quarterly taxes IF your tax estimate is accurate and you withhold enough from the RMDs and other sources to cover the taxes. Furthermore, one strategy is to NOT withhold tax from January through October RMDs (or quarterly or however it is taken) , calculate the taxes owed for the entire year and then withhold the entire amount from the final RMD. As long as the tax is withheld, the government counts it as being taken out uniformly thru the year.

From the Kiplinger website, is this info “Withholding more federal income tax on required minimum distributions from traditional IRAs is a popular tax strategy. Under the federal income tax rules, tax withheld at any point in the year is treated as if evenly paid throughout the year. Some retirees rely on this rule to avoid paying estimated taxes and instead have taxes that they expect to owe for the year withheld from an RMD from a traditional IRA. ”!

Here is the link in case anyone doubts me https://www.kiplinger.com/taxes/popu...ger-tax-letter

I think I also saw it on the IRS site but could not relocate that info. I did not want to have nightmares tonite, so stopped looking in the IRS site.

[Patty Hann]

We have a financial advisor for these sorts of decisions. When we get old enough for RMD we will probably just move money from the IRA to a regular account. We are very fortunate to have a pension from my wife’s 30 years in education. 401Ks are fine but a fixed benefit pension is a real game changer. Back when I was teaching we had a number of retired military who had put in their 20 and had a pension. They told me that the pension was how they could afford to teach.

I had a fixed pension....I rolled it over (much like you do an IRA) into a "qualified" investment account.
Fixed pensions do not keep pace with inflation. If your pension is, say $2000 /month, in 10 years that $2000 is only worth $1500. In 20 years it will be worth $1000, that is it will only by half of what it buys today.

[Rich Lester]

From the Kiplinger website, is this info “Withholding more federal income tax on required minimum distributions from traditional IRAs is a popular tax strategy. Under the federal income tax rules, tax withheld at any point in the year is treated as if evenly paid throughout the year. Some retirees rely on this rule to avoid paying estimated taxes and instead have taxes that they expect to owe for the year withheld from an RMD from a traditional IRA. ”!

I've been doing this since 2013. After my father passed in 2012 I was required to take an RMD on the IRA that I had inherited from him since he had obtained the age of required distributions. I take that distribution mid December each year and have anywhere from 30% to 75% of it withheld in federal taxes to cover our personal stock and ETF dividends those investments earn through the year since I reinvest all of the dividends in additional shares of the earning investment. I get the record of my taxable income from our brokerage and estimate taxes and then have them withhold that estimated amount from the RMD. We are now repeating that same strategy with my wife's inherited IRA from her mother while withholding anywhere from 25% to 50% from each of these inherited IRAs to cover federal taxes. With additional taxable dividends the past few years having the withholding come from the IRA RMDs provides a scenario where it's money that we "have" but is not touched with the exception of the required minimum distribution.

[Lee DeRaud]

I had a fixed pension....I rolled it over (much like you do an IRA) into a "qualified" investment account.
Fixed pensions do not keep pace with inflation. If your pension is, say $2000 /month, in 10 years that $2000 is only worth $1500. In 20 years it will be worth $1000, that is it will only by half of what it buys today.

The thing that makes fixed pensions work is that they're in addition to, not instead of, a 401K/IRA.

[Patty Hann]

At the time I rolled over the pension (when I retired) I had 2 IRAs, a 401(k) a Roth IRA and two annuities.
And I still rolled it over. When I turn 70 I will start drawing SS.

Keeping a pension plan that has no COLA provision or any way to offset losses due to inflation is basically having an investment that is always losing money, which can't be a very smart thing to do.
Some plans do not allow a cashout/roll over and so one is stuck with it as it is.
But if can be rolled over and a safe steady income stream is desired, then roll it into qualified CDs or an annuity.
Granted that neither investment will generate a lot of income, but at least it's not the guaranteed loss of value that would occur over time due to inflation if one keeps the pension.

Another thing about pensions.... they can be cut.
It takes a court ruling to do it... just ask all the retired pilots who lost at least half of their pensions when Delta, United, Us Air all cut their pensions, at least by 50% and sometimes to Zero.
According to ERISA (a federal law that sets minimum standards for retirement plans in private industry) if a company terminates a defined benefit plan that does not have enough funding to pay all of the promised benefits, the Pension Benefit Guaranty Corporation (PBGC) will pay plan participants and beneficiaries some retirement benefits, but possibly less than the level of benefits promised. **

**It has never paid out a full benefit... at best it's about 50 cents on the dollar of what the original pension payment was.