What is your current plan for your timing the withdrawal of your Required Minimum Distribution and why? We’d love to hear your thoughts. Comment below 👇
I have struggled with this issue for a few years. I decided to take the RMD in the middle of the year to hedge my bets. However I didn't realize I could take it in installments throughout the year. Thanks for that. Might be a better strategy for me.
Another reason for an end-of-year RMD is if you have some or all of it withheld to pay taxes on income from earlier in the year. (May even avoid the need for quarterly estimated tax payments-- as IRS considers it as being paid evenly across the year.)
You solve the entire “timing” issue by keeping 2-3 years of RMD in cash, so regardless of when you take your withdrawals you are not forced to sell any holdings to fund the RMD. 2-3 years cash help weather downturns and avoid forced selling. Then replenish the cash with better timed sales. You also have cash for QCD’s.
A reason to NOT take RMD at beginning of the year: If you leave RMD in tax deferred account until the end of the year, it will be a worth a little more because you won't be liable for paying tax on dividend and capital gain distributions during the year as you would if it was in taxable account. I don't think you'd ever want to deliberately give up income to keep taxes low. . .
what this and similar videos leave out is that u still have to have $ to live on while making those conversions between 65-70 (presuming ppl have a lot of cash/Roth $ ??) and any $ u pull from social security/IRA distributions eats away at the effectiveness of doing these conversions. then u've got medicare premiums that are tied to your earned income to which each conversion is, according to the irs. i love the idea given here but it has these competing interests that should be talked about at the same time.
@safeguard one thing I wanted to get clarification on. If I am taking RMD and do not need it for income and reinvest it in a taxable account, and given that RMD is based on previous year end of year balance, then why would it matter if I take the RMD at the beginning or end of year? If the balance went up during the year and I take it at end of year as I do now, since rmd is based on previous year end balance I don’t understand why taking at end of year is a disadvantage?
It's not bad as much as it is less optimal. If you're taking an RMD at the end of the year, your IRA balance plus the RMD will have grown throughout the year leading to a larger IRA balance. When you take your RMD at the end of the year, you are making less of a dent in the IRA balance than if you took at the beginning of the year. If you have an excess RMD, you generally want to try to minimize this IRA balance over time. On average, taking at the beginning of the year does a better job of this.
One way to mitigate RMDs is through Asst Location. If possible, keep asset classes with higher expected returns (i.e., stocks) in taxable and/or Roth accounts. Put asset classes with lower expected returns (i.e., cash and/or bonds) in tax-deferred accounts to slow the growth rate of the RMDs. We intend to take 4% annually from our tax-deferred portfolio payable every month (i.e., 0.33% monthly). If there is income space left in the lower tax bracket (i.e., 12% bracket), we will take a higher distribution to mitigate potential future taxes. If the market is in a downturn, we would most likely be selling asset classes such as cash and/or high-quality fixed income, mitigating selling stocks in a downturn and rebalancing the tax-deferred account to the desired asset allocation.
Enjoy your tips. my financial guy made a mistake and took $19,000 more than needed for my RMD. i am hoping he comes back with a solution since i have not filed my taxes yet. can they fix it?
I now wish I took my RMD in Jan ….before the big drop in the account. Taking it now will use up more shares….thus having less shares left to re inflate. Now do I take it before it drops any further….or hope that the market will go back up at the end of the year?
Can you do an In-kind Transfer with an inherited IRA? The reason I ask is unfortunately, with an inherited IRA, I can't do a Qualified Charitable Distribution.
You can do a QCD from an inherited IRA if you meet the age requirement. But yes, your custodian should allow you to do an in-kind transfer to your taxable account from an inherited IRA as well.
When RMD’s are required, can you just convert to a Roth. Say your RMD is 50k. Would rolling that into a Roth suffice or do they require you to completely remove from your retirement accounts?
Great thought, but unfortunately the IRS is 2 steps ahead. They don't allow an RMD to be converted into a Roth IRA. You could convert an additional amount beyond the RMD if you wanted though.
@@rodrigok1220The primary theme around Roth conversions is yes, in anticipation of RMD‘s spiking your taxable income. But there are still some cases where it makes sense to do Roth conversions after RMD‘s have started.
@@rodrigok1220 once you are required to take a RMD, the RMD which is based on the balances on 12-31-2023(for this year) must be taken first. Once taken, a conversion still be done. If you have an employed spouse, your RMD could legally be contributed into the spouse's Roth up to the amount they are allowed to contribute. I have 2 employed adult children and one part time employed grandchild. I have opened and fund their Roth accounts each year and I could technically also spend my RMD's, which begin next year on their accounts, if I so wished. So when it comes to Roth accounts, there are no age limits for Roth contributing if they have earned income, and there are no age limits for converting, but RMD's must come out first. Just be prepared for the income taxes the conversion created.
This is a video topic in itself. Different folks have different level of taxation of their benefits up to 85% of the SS is taxed. Tax is partially determined if you file taxes as single or as married/jointly. If the balances of the retirement accounts are tax deferred, depending on the balance of those accounts will be required to be taxed. In my situation, I turn 73 next year, so the deferred tax balances on 12-31-2024 will give me an idea of what my RMD will be. There are some people that have $2M in their tax deferred accounts and depending on what other income they have to report, they might have enough income that their monthly Medicare payments will be much higher(IRMAA rule). Next example could be like a single person that only gets SS of $12k/year. This person likely pays zero taxes on their SS wages. If that single person also had other sources of taxable income, such as a RMD, the RMD could be large enough when added to the other income to have their SS taxed at up to 85%. So one needs to know their taxable total income, what their filing status is(single or married, etc), what the current IRMAA income levels are that can potentially increase ones payment for Medicare(if this applies), what their standard deduction amount will be and if they are entitled to the senior deduction as well and roughly compute your tax return. I have taken action to reduce our RMD to about $6-7k/annually by converting a large amount of our deferred taxable retirement accounts to Roth IRA's. The initial $6-7k each year I have determined for us will not impact SS or much of anything else. In the end, if you receive a lower amount of SS and pay zero income taxes, but with any RMD amounts, if large enough could cause you to pay income taxes on your SS benefits.
Why dont you use more realistic and reasonable numbers; say 100,000 instead of a million plus.? Millionaires are not the ones watching Utube advice on economics.
@@frederickwise5238 missed your point..but I figure that it's always good to get a variety of opinions from a variety of sources..you can refer to me as a teenage queen of the sixties....recently widowed and trying to get a handle on things!
@@nancysexton545 My point was "dream on" about millionaires watching Utubes for tax advice. They have costly advisors. Likely pay them 10 times as much as I take in an RMD. LOL I would've thot a teen from the 60's would know some teeny bopper songs of the 50's. It was a Johnny Cash hit of '58 and on every DJ's play list for several months. I was an "exteen" by 4 years and I remembered it even tho I was in boot camp @ the time. Condolences on your loss. I wish you well. 😮💨
What is your current plan for your timing the withdrawal of your Required Minimum Distribution and why? We’d love to hear your thoughts. Comment below 👇
Buy low, sell high is also a good thing to think about. Take the RMD when share value is up so you take the minimum number of shares.
I have struggled with this issue for a few years. I decided to take the RMD in the middle of the year to hedge my bets. However I didn't realize I could take it in installments throughout the year. Thanks for that. Might be a better strategy for me.
Your show was very helpful. P.S. I built a stack wood house also, back in '83. and loved it.
Another reason for an end-of-year RMD is if you have some or all of it withheld to pay taxes on income from earlier in the year. (May even avoid the need for quarterly estimated tax payments-- as IRS considers it as being paid evenly across the year.)
That's exactly what I do. Take the inherited RMD mid December and withhold a big chunk of taxes. It's then rolled into a taxable account.
If you think you are facing a declining stock market, you could switch stock into cash accounts within the IRA at the beginning. of the year.
You solve the entire “timing” issue by keeping 2-3 years of RMD in cash, so regardless of when you take your withdrawals you are not forced to sell any holdings to fund the RMD. 2-3 years cash help weather downturns and avoid forced selling. Then replenish the cash with better timed sales. You also have cash for QCD’s.
Worked all my life for the golden years and find out that elderly pay more taxes,,,,
A reason to NOT take RMD at beginning of the year: If you leave RMD in tax deferred account until the end of the year, it will be a worth a little more because you won't be liable for paying tax on dividend and capital gain distributions during the year as you would if it was in taxable account. I don't think you'd ever want to deliberately give up income to keep taxes low. . .
If you’re reinvesting it in another mutual fund you’re better off with future capital gains at capital gain rates instead of ordinary income.
what this and similar videos leave out is that u still have to have $ to live on while making those conversions between 65-70 (presuming ppl have a lot of cash/Roth $ ??) and any $ u pull from social security/IRA distributions eats away at the effectiveness of doing these conversions. then u've got medicare premiums that are tied to your earned income to which each conversion is, according to the irs. i love the idea given here but it has these competing interests that should be talked about at the same time.
People with no money don't have to worry about this issue.
@safeguard one thing I wanted to get clarification on. If I am taking RMD and do not need it for income and reinvest it in a taxable account, and given that RMD is based on previous year end of year balance, then why would it matter if I take the RMD at the beginning or end of year? If the balance went up during the year and I take it at end of year as I do now, since rmd is based on previous year end balance I don’t understand why taking at end of year is a disadvantage?
It's not bad as much as it is less optimal. If you're taking an RMD at the end of the year, your IRA balance plus the RMD will have grown throughout the year leading to a larger IRA balance. When you take your RMD at the end of the year, you are making less of a dent in the IRA balance than if you took at the beginning of the year. If you have an excess RMD, you generally want to try to minimize this IRA balance over time. On average, taking at the beginning of the year does a better job of this.
One way to mitigate RMDs is through Asst Location. If possible, keep asset classes with higher expected returns (i.e., stocks) in taxable and/or Roth accounts. Put asset classes with lower expected returns (i.e., cash and/or bonds) in tax-deferred accounts to slow the growth rate of the RMDs. We intend to take 4% annually from our tax-deferred portfolio payable every month (i.e., 0.33% monthly). If there is income space left in the lower tax bracket (i.e., 12% bracket), we will take a higher distribution to mitigate potential future taxes. If the market is in a downturn, we would most likely be selling asset classes such as cash and/or high-quality fixed income, mitigating selling stocks in a downturn and rebalancing the tax-deferred account to the desired asset allocation.
Great as always. On an in kind transfer I assume since you are paying tax you get a step up in basis?
Can I use "excess" RMD monies that I don't need and fund a ROTH? ROTH Conversion?
A portfolio that has a portion in the stock market will always have grown by the end of the year?
Enjoy your tips. my financial guy made a mistake and took $19,000 more than needed for my RMD. i am hoping he comes back with a solution since i have not filed my taxes yet. can they fix it?
I now wish I took my RMD in Jan ….before the big drop in the account. Taking it now will use up more shares….thus having less shares left to re inflate. Now do I take it before it drops any further….or hope that the market will go back up at the end of the year?
Can you do an In-kind Transfer with an inherited IRA? The reason I ask is unfortunately, with an inherited IRA, I can't do a Qualified Charitable Distribution.
You can do a QCD from an inherited IRA if you meet the age requirement. But yes, your custodian should allow you to do an in-kind transfer to your taxable account from an inherited IRA as well.
@@SafeguardWealthManagement That's my problem, I'm 65.
@@SafeguardWealthManagement Thanks for your reply!
Mmmm, I understand. Wish they would change this age requirement.
Do you work with people in California?
Yes, we work with families across the country!
When RMD’s are required, can you just convert to a Roth. Say your RMD is 50k. Would rolling that into a Roth suffice or do they require you to completely remove from your retirement accounts?
Great thought, but unfortunately the IRS is 2 steps ahead. They don't allow an RMD to be converted into a Roth IRA. You could convert an additional amount beyond the RMD if you wanted though.
@@demars-financial So, you have to do all your Roth conversions before RMD’s start.
@@rodrigok1220The primary theme around Roth conversions is yes, in anticipation of RMD‘s spiking your taxable income. But there are still some cases where it makes sense to do Roth conversions after RMD‘s have started.
@@rodrigok1220 once you are required to take a RMD, the RMD which is based on the balances on 12-31-2023(for this year) must be taken first. Once taken, a conversion still be done. If you have an employed spouse, your RMD could legally be contributed into the spouse's Roth up to the amount they are allowed to contribute. I have 2 employed adult children and one part time employed grandchild. I have opened and fund their Roth accounts each year and I could technically also spend my RMD's, which begin next year on their accounts, if I so wished. So when it comes to Roth accounts, there are no age limits for Roth contributing if they have earned income, and there are no age limits for converting, but RMD's must come out first. Just be prepared for the income taxes the conversion created.
How does RMD hurt Social Security?
It increases Social Security's taxability
This is a video topic in itself. Different folks have different level of taxation of their benefits up to 85% of the SS is taxed. Tax is partially determined if you file taxes as single or as married/jointly. If the balances of the retirement accounts are tax deferred, depending on the balance of those accounts will be required to be taxed. In my situation, I turn 73 next year, so the deferred tax balances on 12-31-2024 will give me an idea of what my RMD will be. There are some people that have $2M in their tax deferred accounts and depending on what other income they have to report, they might have enough income that their monthly Medicare payments will be much higher(IRMAA rule). Next example could be like a single person that only gets SS of $12k/year. This person likely pays zero taxes on their SS wages. If that single person also had other sources of taxable income, such as a RMD, the RMD could be large enough when added to the other income to have their SS taxed at up to 85%. So one needs to know their taxable total income, what their filing status is(single or married, etc), what the current IRMAA income levels are that can potentially increase ones payment for Medicare(if this applies), what their standard deduction amount will be and if they are entitled to the senior deduction as well and roughly compute your tax return. I have taken action to reduce our RMD to about $6-7k/annually by converting a large amount of our deferred taxable retirement accounts to Roth IRA's. The initial $6-7k each year I have determined for us will not impact SS or much of anything else. In the end, if you receive a lower amount of SS and pay zero income taxes, but with any RMD amounts, if large enough could cause you to pay income taxes on your SS benefits.
Why dont you use more realistic and reasonable numbers; say 100,000 instead of a million plus.? Millionaires are not the ones watching Utube advice on economics.
Yes, they are!!
@@nancysexton545 To quote a song from the 50's "Dream on teen age queen"
@@frederickwise5238 missed your point..but I figure that it's always good to get a variety of opinions from a variety of sources..you can refer to me as a teenage queen of the sixties....recently widowed and trying to get a handle on things!
@@nancysexton545 My point was "dream on" about millionaires watching Utubes for tax advice. They have costly advisors. Likely pay them 10 times as much as I take in an RMD. LOL
I would've thot a teen from the 60's would know some teeny bopper songs of the 50's. It was a Johnny Cash hit of '58 and on every DJ's play list for several months. I was an "exteen" by 4 years and I remembered it even tho I was in boot camp @ the time.
Condolences on your loss. I wish you well. 😮💨
Agree☺@@nancysexton545
The IRS has you start at 73.