RMDs not far away for me

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RMDs not far away for me

Postby ol_pops » Fri Aug 30, 2013 4:33 pm

I looked at the Vanguard site and it was vague about how it distributed RMDs.
Does it calculate the amount and then take equally from all accounts?
Does it take them relative to the size of the account -vs- ovealll accounts?
Can I direct them to take it from only one or two accounts?

I could do it all myself too.
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Re: RMDs not far away for me

Postby Sidney » Fri Aug 30, 2013 4:38 pm

You must instruct them. They will not do anything unless you tell them to. To put it another way, the only ones who care if you distribute your IRA on schedule is the IRS.
I always wanted to be a procrastinator.
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Re: RMDs not far away for me

Postby CABob » Fri Aug 30, 2013 4:41 pm

I think they will do any of the things you mentioned which may be the reason they seemed vague. You just need to tell them what you want. I believe you can take care of it online, but, if there are more than one IRA involved it would perhaps be better to talk to them directly. I think that they will contact you early in the year you must take RMD and provide direction as to how to proceed.
I only have one IRA involved and I have had them take RMD proportionally from all funds in the IRA.
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Re: RMDs not far away for me

Postby dickenjb » Fri Aug 30, 2013 4:47 pm

The Vanguard RMD service has two options.

Calculate only.

Calculate and distribute.

If you choose the second option you have further options such as which IRA to take it from (if you have more than one) and where to put it. Also frequency I believe (annual, quarterly, monthly).

If you have other IRA's elsewhere it is best to choose calculate only and then you will need to sum up all the RMD's to come up with your total RMD.
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Re: RMDs not far away for me

Postby john94549 » Fri Aug 30, 2013 11:44 pm

As I recall, RMDs when all you have are IRAs are fairly simple. You calculate the RMD (using readily-available on-line tools), then deduct the RMD from one or any number of your IRAs. The rules for 401Ks, not so simple, as I recall. There, I would suggest professional guidance. I suspect the most complicated scenario is a combination of IRAs and left-over 401Ks, with a current 401K in a job where one is over 70 1/2. My wife might actually face that scenario. I will not. Other than indirectly. Should this scenario occur, I will leave it to our CPA.
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Re: RMDs not far away for me

Postby CABob » Sat Aug 31, 2013 12:22 am

dickenjb wrote:The Vanguard RMD service has two options.

Calculate only.

Calculate and distribute.

And you can change your preference anytime you want to.
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Re: RMDs not far away for me

Postby mickeyd » Sat Aug 31, 2013 12:49 pm

I recently had an informative discussion with my Flagship rep on this very topic even tho my RMD date is in 2015. You might give your guy a call and get some advice/suggestion from a disinterested party at a cost of zero.
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Re: RMDs not far away for me

Postby jsl11 » Sat Aug 31, 2013 1:54 pm

You may also wish to use the RMD as an opportunity to rebalance (at least partially). You can do this by comparing your present allocation with your target allocation. Then make withdrawals from the asset that is "over" your target.
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Re: RMDs not far away for me

Postby chaz » Sat Aug 31, 2013 2:05 pm

I,also,use the RMD as the time to rebalance as needed.
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Re: RMDs not far away for me

Postby rotorhead » Sat Aug 31, 2013 8:26 pm

I am doing RMD's from my Fidelity account since last year. The account has 3 equity and 2 bond funds; have it set up to do proportional withdrawal on monthly basis. Was not automatic; had to call them and get it set up properly. I'm sure Vanguard have a similar process. It's working OK so far; but am starting to think maybe time to "sort of re-balance a bit" by not taking anything out of the bond funds for the immediate future.
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Re: RMDs not far away for me

Postby The Wizard » Sat Aug 31, 2013 8:43 pm

chaz wrote:I,also,use the RMD as the time to rebalance as needed.

OK but you don't have to SPEND the proceeds from each RMD or keep it in CASH forever.
You can just reinvest the amount after taxes in your after-tax account.
So I guess what you're saying is: you take the RMD out of your stock mutual fund and reinvest the 70% remaining into you after-tax bond mutual fund...
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Re: RMDs not far away for me

Postby jsl11 » Sat Aug 31, 2013 10:09 pm

The Wizard wrote:
chaz wrote:I,also,use the RMD as the time to rebalance as needed.

OK but you don't have to SPEND the proceeds from each RMD or keep it in CASH forever.
You can just reinvest the amount after taxes in your after-tax account.
So I guess what you're saying is: you take the RMD out of your stock mutual fund and reinvest the 70% remaining into you after-tax bond mutual fund...

By selecting the fund(s) in an IRA for withdrawal, the RMD can be used to rebalance just by reducing the asset that is over-allocated. What the investor does with the money withdrawn (after taxes) is a separate question. If it is not spent, you are correct. It can be used to purchase taxable investments and thereby further rebalancing.

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Re: RMDs not far away for me

Postby LarryG » Sat Aug 31, 2013 10:56 pm

I chose to have Vanguard calculate my RMD. I then made withdrawals from the fund(s) to rebalance my asset allocation. The proceeds were deposited into my taxable account. In December I had Vanguard withhold my income tax from the distribution.
Simple.
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Re: RMDs not far away for me

Postby chaz » Sat Aug 31, 2013 11:04 pm

jsl11 wrote:
The Wizard wrote:
chaz wrote:I,also,use the RMD as the time to rebalance as needed.

OK but you don't have to SPEND the proceeds from each RMD or keep it in CASH forever.
You can just reinvest the amount after taxes in your after-tax account.
So I guess what you're saying is: you take the RMD out of your stock mutual fund and reinvest the 70% remaining into you after-tax bond mutual fund...

By selecting the fund(s) in an IRA for withdrawal, the RMD can be used to rebalance just by reducing the asset that is over-allocated. What the investor does with the money withdrawn (after taxes) is a separate question. If it is not spent, you are correct. It can be used to purchase taxable investments and thereby further rebalancing.

Jeff

Jeff is correct, but DW and I like to go on cruises, so that is where the money is deposited.
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Re: RMDs not far away for me

Postby Paul@ » Sun Sep 01, 2013 9:00 am

I've got a small IRA where I instructed that the RMD be calculated based on my life expectancy.

I assume - but never verified - that such an amount would meet IRS requirements for RMD. Does anyone know if this is a safe assumption?
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Re: RMDs not far away for me

Postby The Wizard » Sun Sep 01, 2013 9:03 am

Paul@ wrote:I've got a small IRA where I instructed that the RMD be calculated based on my life expectancy.

I assume - but never verified - that such an amount would meet IRS requirements for RMD. Does anyone know if this is a safe assumption?

Since that's exactly the definition of an RMD you should be good. IRS has a table for this which presumably "they" are using...
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Re: RMDs not far away for me

Postby CABob » Sun Sep 01, 2013 11:50 am

Paul@ wrote:I've got a small IRA where I instructed that the RMD be calculated based on my life expectancy.

I assume - but never verified - that such an amount would meet IRS requirements for RMD. Does anyone know if this is a safe assumption?

How did you calculate your life expectancy? If you used the applicable tables from IRS Publication 590 you should be good since that is what is the IRS regulations. If you used some other calculation I would be concerned especially if your result is a longer life expectancy than the IRS.
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Re: RMDs not far away for me

Postby jsl11 » Sun Sep 01, 2013 12:18 pm

Paul@ wrote:I've got a small IRA where I instructed that the RMD be calculated based on my life expectancy.

I assume - but never verified - that such an amount would meet IRS requirements for RMD. Does anyone know if this is a safe assumption?

The calculation is easy and you can verify the amount yourself. You start with your account balance (all of your IRA accounts combined) on December 31 of the previous year. You look up your age in the table found in IRS Publication 590. The age to use is the age you will be on your birthday for the year you are calculating. For each age the table gives you a number. You divide the December 31 balance by that number and that gives you the amount you must withdraw. The number changes each year, causing the withdrawal percentage to increase.
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Re: RMDs not far away for me

Postby gkaplan » Sun Sep 01, 2013 1:02 pm

LarryG wrote:I chose to have Vanguard calculate my RMD. I then made withdrawals from the fund(s) to rebalance my asset allocation. The proceeds were deposited into my taxable account. In December I had Vanguard withhold my income tax from the distribution.
Simple.
LarryG



This is exactly what I plan to do in December 2014 and each December thereafter.
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Re: RMDs not far away for me

Postby jsl11 » Sun Sep 01, 2013 2:01 pm

gkaplan wrote:
LarryG wrote:I chose to have Vanguard calculate my RMD. I then made withdrawals from the fund(s) to rebalance my asset allocation. The proceeds were deposited into my taxable account. In December I had Vanguard withhold my income tax from the distribution.
Simple.
LarryG



This is exactly what I plan to do in December 2014 and each December thereafter.

Don't forget about Qualified Charitable Donations. If you are older than 70.5 this is available. The donations count toward your RMD, but are not taxable even if you don't itemize. They may also avoid state income taxation.
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Re: RMDs not far away for me

Postby mickeyd » Sun Sep 01, 2013 2:12 pm

Jeff, Where did you get this info?. I have always used "current" age . My BD is November. Have I been refering to it incorectly?

The age to use is the age you will be on your birthday for the year you are calculating.
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Re: RMDs not far away for me

Postby minesweep » Sun Sep 01, 2013 2:16 pm

gkaplan wrote:
LarryG wrote:I chose to have Vanguard calculate my RMD. I then made withdrawals from the fund(s) to rebalance my asset allocation. The proceeds were deposited into my taxable account. In December I had Vanguard withhold my income tax from the distribution.
Simple.
LarryG



This is exactly what I plan to do in December 2014 and each December thereafter.

That is exactly what I plan to do (beginning in December 2015).

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Re: RMDs not far away for me

Postby kaneohe » Sun Sep 01, 2013 2:41 pm

Are you saying that you can separate (in time) the RMD and withholding? take the RMD now and the withholding later?
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Re: RMDs not far away for me

Postby jebmke » Sun Sep 01, 2013 3:05 pm

kaneohe wrote:Are you saying that you can separate (in time) the RMD and withholding? take the RMD now and the withholding later?

If your RMD is sufficient, I think the strategy is to time your withdrawal in December and have your entire estimated tax requirement taken from the RMD at the time it gets distributed. That way you don't have to meet the quarterly test.
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Re: RMDs not far away for me

Postby jsl11 » Sun Sep 01, 2013 3:14 pm

mickeyd wrote:Jeff, Where did you get this info?. I have always used "current" age . My BD is November. Have I been refering to it incorectly?

The age to use is the age you will be on your birthday for the year you are calculating.

Mickey,
When I first calculated my first RMD, I did what you did. Vanguard's RMD service had a different number. I asked Vanguard and they told me to use the BD in the year of withdrawal. My BD is also late in the year. I checked Pub 590, and found out that Vanguard was correct and I was wrong. No surprise there. I'll take a look at 590 to see if I can find the reference.
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Re: RMDs not far away for me

Postby jebmke » Sun Sep 01, 2013 3:16 pm

jsl11 wrote:
mickeyd wrote:Jeff, Where did you get this info?. I have always used "current" age . My BD is November. Have I been refering to it incorectly?

The age to use is the age you will be on your birthday for the year you are calculating.

Mickey,
When I first calculated my first RMD, I did what you did. Vanguard's RMD service had a different number. I asked Vanguard and they told me to use the BD in the year of withdrawal. My BD is also late in the year. I checked Pub 590, and found out that Vanguard was correct and I was wrong. No surprise there. I'll take a look at 590 to see if I can find the reference.
Jeff

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Re: RMDs not far away for me

Postby jsl11 » Sun Sep 01, 2013 3:24 pm

Page 36 in Pub 590 states:

To figure the required minimum distribution for 2013, di-vide your account balance at the end of 2012 by the distri-bution period from the table. This is the distribution period listed next to your age (as of your birthday in 2013) in Ta-ble III in Appendix C, unless the sole beneficiary of your IRA is your spouse who is more than 10 years younger than you.
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Re: RMDs not far away for me

Postby mickeyd » Sun Sep 01, 2013 3:30 pm

jebmke wrote:
jsl11 wrote:
mickeyd wrote:Jeff, Where did you get this info?. I have always used "current" age . My BD is November. Have I been refering to it incorectly?

The age to use is the age you will be on your birthday for the year you are calculating.

Mickey,
When I first calculated my first RMD, I did what you did. Vanguard's RMD service had a different number. I asked Vanguard and they told me to use the BD in the year of withdrawal. My BD is also late in the year. I checked Pub 590, and found out that Vanguard was correct and I was wrong. No surprise there. I'll take a look at 590 to see if I can find the reference.
Jeff

Starts on P-35. I think the example they give for a single woman is relevant.



Thanks Jeff, even tho I am not a single woman, its pretty clear that age 71 is to be used. :sharebeer
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Re: RMDs not far away for me

Postby frugaltype » Sun Sep 01, 2013 3:35 pm

I did some calling around recently, because I will be in RMD land next year. I have much of my stuff at credit unions. They all said they'd be automatically sending me a letter telling me the end of year balance and the amount I had to take out if I were taking it out of that account, but they don't do anything unless I ask them to. There were wide variations on when they said the letter would come out, but I'm not sure the phone reps were all up to speed.

I'd called Vanguard awhile back and they also said they did not take out anything unless I instructed them to do so.
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Re: RMDs not far away for me

Postby jebmke » Sun Sep 01, 2013 3:38 pm

mickeyd wrote:Thanks Jeff, even tho I am not a single woman, its pretty clear that age 71 is to be used. :sharebeer

No, but if there are single women out there taking their RMDs, maybe they will buy you a :beer
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Re: RMDs not far away for me

Postby kaneohe » Sun Sep 01, 2013 8:13 pm

jebmke wrote:
kaneohe wrote:Are you saying that you can separate (in time) the RMD and withholding? take the RMD now and the withholding later?

If your RMD is sufficient, I think the strategy is to time your withdrawal in December and have your entire estimated tax requirement taken from the RMD at the time it gets distributed. That way you don't have to meet the quarterly test.


jebmke, thanks, that makes sense. The original text I was looking was a bit confusing to me, even now, since it sounded like there were earlier distributions and then the withholding in Dec.
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Re: RMDs not far away for me

Postby CABob » Sun Sep 01, 2013 8:26 pm

kaneohe wrote:
jebmke wrote:
kaneohe wrote:Are you saying that you can separate (in time) the RMD and withholding? take the RMD now and the withholding later?

If your RMD is sufficient, I think the strategy is to time your withdrawal in December and have your entire estimated tax requirement taken from the RMD at the time it gets distributed. That way you don't have to meet the quarterly test.


jebmke, thanks, that makes sense. The original text I was looking was a bit confusing to me, even now, since it sounded like there were earlier distributions and then the withholding in Dec.

It could be done this way also. I only take RMD once each year, late in the year and have withholding taken from it. But, if I chose to do so I could take earlier RMD monthly, quarterly, etc. and still have my years worth of withholding taken from the last yearly withdrawal.
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Re: RMDs not far away for me

Postby kaneohe » Sun Sep 01, 2013 8:58 pm

CABob wrote:
kaneohe wrote:
jebmke wrote:
kaneohe wrote:Are you saying that you can separate (in time) the RMD and withholding? take the RMD now and the withholding later?

If your RMD is sufficient, I think the strategy is to time your withdrawal in December and have your entire estimated tax requirement taken from the RMD at the time it gets distributed. That way you don't have to meet the quarterly test.


jebmke, thanks, that makes sense. The original text I was looking was a bit confusing to me, even now, since it sounded like there were earlier distributions and then the withholding in Dec.

It could be done this way also. I only take RMD once each year, late in the year and have withholding taken from it. But, if I chose to do so I could take earlier RMD monthly, quarterly, etc. and still have my years worth of withholding taken from the last yearly withdrawal.


CABob.......that's useful to know. How are you getting this flexibility......can you do verbal requests on the phone? or do you request this in writing..........seems like you'd want some flexibility since you might not know your tax situation tll later in the year. I only have a 401K w/ VG, no IRAs and they seem not to be too flexible with the RMDs for the 401K.......or perhaps I didn't read the form correctly.
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Re: RMDs not far away for me

Postby jebmke » Sun Sep 01, 2013 9:22 pm

CABob wrote:It could be done this way also. I only take RMD once each year, late in the year and have withholding taken from it. But, if I chose to do so I could take earlier RMD monthly, quarterly, etc. and still have my years worth of withholding taken from the last yearly withdrawal.

That is good to know. I didn't realize they would withhold more that 100% of the last withdrawal.
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Re: RMDs not far away for me

Postby CABob » Sun Sep 01, 2013 10:39 pm

CABob.......that's useful to know. How are you getting this flexibility......can you do verbal requests on the phone? or do you request this in writing..........seems like you'd want some flexibility since you might not know your tax situation tll later in the year. I only have a 401K w/ VG, no IRAs and they seem not to be too flexible with the RMDs for the 401K.......or perhaps I didn't read the form correctly.

I only have one IRA at Vanguard and no 401k and am not familiar with the provisions for withdrawals from 401k plans. I could believe there may be some differences between the two types of retirement plans. I try to keep it simple and generally have a withholding for tax in the amount of tax I paid the prior year in order to meet the safe haven requirement and no penalty. I have also had some qualified charitable contributions taken from my IRA so that amount has to be considered.
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Re: RMDs not far away for me

Postby JohnF » Mon Sep 02, 2013 8:37 pm

CABob wrote:
kaneohe wrote:
jebmke wrote:
kaneohe wrote:Are you saying that you can separate (in time) the RMD and withholding? take the RMD now and the withholding later?

If your RMD is sufficient, I think the strategy is to time your withdrawal in December and have your entire estimated tax requirement taken from the RMD at the time it gets distributed. That way you don't have to meet the quarterly test.


jebmke, thanks, that makes sense. The original text I was looking was a bit confusing to me, even now, since it sounded like there were earlier distributions and then the withholding in Dec.

It could be done this way also. I only take RMD once each year, late in the year and have withholding taken from it. But, if I chose to do so I could take earlier RMD monthly, quarterly, etc. and still have my years worth of withholding taken from the last yearly withdrawal.


Assume your referring to Federal withholding only? At least for Georgia, I don’t believe Vanguard will withhold State tax from an IRA withdrawal. Someone please correct if I’m mistaken.
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Re: RMDs not far away for me

Postby joe8d » Mon Sep 02, 2013 9:06 pm

Assume your referring to Federal withholding only? At least for Georgia, I don’t believe Vanguard will withhold State tax from an IRA withdrawal. Someone please correct if I’m mistaken.


You are correct.They wouldn't withhold NY tax for me.Of course, I get a 20K exclusion from NY for IRA distributions.
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Re: RMDs not far away for me

Postby jsl11 » Mon Sep 02, 2013 9:25 pm

Vanguard has told me that they will withhold state income taxes, but only if your state requires them to do so. They will not withhold for Ohio either.
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Re: RMDs not far away for me

Postby dennygt » Tue Sep 03, 2013 9:50 pm

joe8d wrote:
Assume your referring to Federal withholding only? At least for Georgia, I don’t believe Vanguard will withhold State tax from an IRA withdrawal. Someone please correct if I’m mistaken.


You are correct.They wouldn't withhold NY tax for me.Of course, I get a 20K exclusion from NY for IRA distributions.



I'm from Michigan and Vanguard withheld the state tax, after I asked them to. The funny thing was, I wanted less than the 4.35% income tax rate, but Vanguard told me that, if the client asked for witholding, then Michigan required them to withhold at the 4.35% rate, nothing less, nothing more. So, based on my experience and what I've read here, it looks like every state has a different set of rules.
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