How exactly does Vanguard's RMD service work? Rebalancing?
Re: How exactly does Vanguard's RMD service work? Rebalancing?
Thanks all. So, if my mom is competent and understands everything and is going to call Vanguard each year and ask them to send a check directly for X amount to the charity, then withhold X amount of what is left for taxes and deposit the remaining part of the RMD into her bank account or taxable account should she use the service or just do this directly through Flagship rep and/or website? She already got a letter saying how much she must take out, so my guess is the letter isn't part of the service.
Re: How exactly does Vanguard's RMD service work? Rebalancing?
You should be aware that while Vanguard will withhold for federal taxes, they will not withhold for state income taxes for some states. Ohio is one of the states for which Vanguard will not withhold taxes.runner9 wrote:Thanks all. So, if my mom is competent and understands everything and is going to call Vanguard each year and ask them to send a check directly for X amount to the charity, then withhold X amount of what is left for taxes and deposit the remaining part of the RMD into her bank account or taxable account should she use the service or just do this directly through Flagship rep and/or website? She already got a letter saying how much she must take out, so my guess is the letter isn't part of the service.
Re: How exactly does Vanguard's RMD service work? Rebalancing?
After the charitable contributions are taken out the amount remaining for RMD has changed so a new calculation is warranted. I recently had some QCD checks issued then went online and asked for a recalculation. You or your mother should probably go through the online RMD process at least once to see what is involved. She will need to determine where the RMD is taken from if she has more than one fund in the IRA. The amount of taxes withheld needs to be specified. If she goes through the Vanguard rep I would guess that the rep is filling out the form just as mother would. It is up to her which is preferable.runner9 wrote:Thanks all. So, if my mom is competent and understands everything and is going to call Vanguard each year and ask them to send a check directly for X amount to the charity, then withhold X amount of what is left for taxes and deposit the remaining part of the RMD into her bank account or taxable account should she use the service or just do this directly through Flagship rep and/or website? She already got a letter saying how much she must take out, so my guess is the letter isn't part of the service.
P.S. I thought there ought to be a way to request QCD checks online but was told that that one must go through a rep via telephone.
Bob
- thecarrotfund
- Posts: 69
- Joined: Sat Jan 09, 2016 9:20 am
- Location: Scottsdale, AZ
Re: How exactly does Vanguard's RMD service work? Rebalancin
+1Charles Mahaffey wrote:I use the service for an inherited IRA. My solution to rebalancing is to calculate the RMD my self once I know the IRA account balance at year end. Then prior to the first distribution for the year, which takes place late in January, I rebalance the accounts on my own setting aside cash in the money market account sufficient to cover the RMD amount for the year. I know that my approach loses on the upside in an up market but protects me in a down market. The service once setup works fine and our RMD calculations agree to the penny. I like it because it saves me the time of having to call each year and go through to the trouble of contacting Vanguard and establishing how I want the payments made. Your post left me with impression that the Vanguard rep you spoke with was one of their "regular" reps. Call an ask to speak with someone in their IRA group who specialize in IRAs only. They should be able to answer all your questions about how they would liquidate funds to make distributions if you don't do it yourself.
This is how we do it also.
"not all storms are in the forecast"
Re: How exactly does Vanguard's RMD service work? Rebalancing?
If you have checkwriting on your IRA (I know that both Vanguard and Fidelity allow this) you can write the QCD check from your IRA account yourself, and send it to the charity. This is the easiest way for me to do it, since I donate relatively small amounts (but at or over VG's $250 minimum check) to several charities.friar1610 wrote:
IIRC, you need to make sure the QCD is either paid:
- directly to the charity
- to you via a check made out to the charity which you then forward to the charity.
As I understand it, receiving a RMD, putting it in your checking account and then writing a check to the charity doesn't count as a QCD (although it would count as a deductible charitable contribution).
Re: How exactly does Vanguard's RMD service work? Rebalancing?
If you have actually done this I guess it works but I am surprised. If you write a check how does Vanguard know that it is a QCD rather than a normal withdrawal?Minot wrote: If you have checkwriting on your IRA (I know that both Vanguard and Fidelity allow this) you can write the QCD check from your IRA account yourself, and send it to the charity.
Bob
Re: How exactly does Vanguard's RMD service work? Rebalancing?
Vanguard treats all QCDs as normal withdrawals, even when they write the check. The 1099R you get at the end of the year does not make a distinction between QCDs and normal withdrawals. You make that distinction on your 1040 Form.CABob wrote:If you have actually done this I guess it works but I am surprised. If you write a check how does Vanguard know that it is a QCD rather than a normal withdrawal?Minot wrote: If you have checkwriting on your IRA (I know that both Vanguard and Fidelity allow this) you can write the QCD check from your IRA account yourself, and send it to the charity.
Re: How exactly does Vanguard's RMD service work? Rebalancing?
Thanks for pointing that out. I don't have check writing on my IRA so did not realize this.Minot wrote:If you have checkwriting on your IRA (I know that both Vanguard and Fidelity allow this) you can write the QCD check from your IRA account yourself, and send it to the charity. This is the easiest way for me to do it, since I donate relatively small amounts (but at or over VG's $250 minimum check) to several charities.friar1610 wrote:
IIRC, you need to make sure the QCD is either paid:
- directly to the charity
- to you via a check made out to the charity which you then forward to the charity.
As I understand it, receiving a RMD, putting it in your checking account and then writing a check to the charity doesn't count as a QCD (although it would count as a deductible charitable contribution).
Friar1610 |
50-ish/50-ish - a satisficer, not a maximizer
Re: How exactly does Vanguard's RMD service work? Rebalancing?
I moved our IRAs from another firm to Vanguard this year.
I’m 99% sure the old firm sent us distribution checks this year representing our RMDs (even though we didn’t ask) before porting our money to Vanguard. So our next RMDs are in 2019. I also recently set up a non-retirement account at Vanguard b/c we don’t need our RMD for living expenses. I was hoping I could have them send me 50% of ourvRMDs and have them invest the other half but you can’t do that.
Q: I want to change Distribution Type to Invest in Taxable Account from Distribution by Check. And increase my withholding amount.
In Vanguard, under My Accounts> RMDs> Your RMD automatic distribution the Edit/Delete button is grayed out.
Any reason for this?
I’m 99% sure the old firm sent us distribution checks this year representing our RMDs (even though we didn’t ask) before porting our money to Vanguard. So our next RMDs are in 2019. I also recently set up a non-retirement account at Vanguard b/c we don’t need our RMD for living expenses. I was hoping I could have them send me 50% of ourvRMDs and have them invest the other half but you can’t do that.
Q: I want to change Distribution Type to Invest in Taxable Account from Distribution by Check. And increase my withholding amount.
In Vanguard, under My Accounts> RMDs> Your RMD automatic distribution the Edit/Delete button is grayed out.
Any reason for this?
Re: How exactly does Vanguard's RMD service work? Rebalancing?
Would anyone want to consider taking their RMD late in the year if the market tanks during the year ? This scenario would allow you to decide to take your RMD from the Bond side of the portfolio as opposed to the equity side.
Re: How exactly does Vanguard's RMD service work? Rebalancing?
I don’t think it matters beginning or end of year, but I have concluded I prefer to manually sell my desired fund in one lump sum each year as an annual rebalancing.
But whether you sell in one transaction, or select recurring withdrawals, same process to ach to bank like withdrawals from taxable accounts.
But whether you sell in one transaction, or select recurring withdrawals, same process to ach to bank like withdrawals from taxable accounts.
Re: How exactly does Vanguard's RMD service work? Rebalancing?
If you want part of your RMD to be used for QCDs, you have to make the QCDs before you have completed the RMD. I make QCDs at various times during the year. Then, near the end of the year, I take the balance of the RMD and specify tax withholding at that time. If you are afraid of market declines in your IRA during the year, you do not need to take the RMD early in the year. You can address that concern by moving the RMD into a money market fund within the IRA, and then make QCDs and other RMD withdrawals whenever you wish throughout the year.blevine wrote: ↑Sun Nov 18, 2018 11:00 am I don’t think it matters beginning or end of year, but I have concluded I prefer to manually sell my desired fund in one lump sum each year as an annual rebalancing.
But whether you sell in one transaction, or select recurring withdrawals, same process to ach to bank like withdrawals from taxable accounts.
Re: How exactly does Vanguard's RMD service work? Rebalancing?
I understand your point. However, I was speaking from my own portfolio situation. I have a tax-advantaged "only" IRA. I do not have a taxable account "yet". I strongly suspect I'll need to create one once I turn 70.5 and have to take RMD's, which will likely turn out to be moor income than I need. I never created a taxable account during my working years because I never really had "excess income" to do so. Most of our money went to pay down debt and pay for 3 kids college education.
Re: How exactly does Vanguard's RMD service work? Rebalancing?
I took my first RMD from VG in early January of this year. I specified that the RMD be taken proportionately from my account.
They took it from all my mutual funds but not from the VG brokerage CDs that were in my account. I requested 25% Federal and 5% state withholding and to have the net proceeds sent to my Federal Money Market account in our taxable account. All went smoothly and that proportionate approach will continue until I change it.
So my mutual funds in my TIRA are essentially rebalanced since it was proportionate.
I believe I set it all up but being the first time I did check with my Flagship Rep to make sure all was set up correctly. The confirm related paperwork was pretty detailed.
They took it from all my mutual funds but not from the VG brokerage CDs that were in my account. I requested 25% Federal and 5% state withholding and to have the net proceeds sent to my Federal Money Market account in our taxable account. All went smoothly and that proportionate approach will continue until I change it.
So my mutual funds in my TIRA are essentially rebalanced since it was proportionate.
I believe I set it all up but being the first time I did check with my Flagship Rep to make sure all was set up correctly. The confirm related paperwork was pretty detailed.
Re: How exactly does Vanguard's RMD service work? Rebalancing?
I start RMD's next year and that is my plan. I just signed up on Vanguard to calculate the RMD amount at the end of this year. In December of next year I withdraw the calculated RMD amount and from that have all federal and state tax withdrawn. This way my withdrawl amount stays invested tax deferred as long as possible plus I pay no tax until the end of the year. No need to have taxes withdrawn from any of my other income sources or pay estimated taxes. I will also take the withdrawl from where needed for rebalancing purposes.
Re: How exactly does Vanguard's RMD service work? Rebalancing?
I suggest you verify that Vanguard will withhold taxes for your state. V will withhold for some states, but not for others. They will not withhold for my state.mpnret wrote: ↑Sun Nov 18, 2018 11:39 amI start RMD's next year and that is my plan. I just signed up on Vanguard to calculate the RMD amount at the end of this year. In December of next year I withdraw the calculated RMD amount and from that have all federal and state tax withdrawn. This way my withdrawl amount stays invested tax deferred as long as possible plus I pay no tax until the end of the year. No need to have taxes withdrawn from any of my other income sources or pay estimated taxes. I will also take the withdrawl from where needed for rebalancing purposes.
Re: How exactly does Vanguard's RMD service work? Rebalancing?
They will withhold for my state (NY). I was just asking if my "possible market scenario" makes sense.
Re: How exactly does Vanguard's RMD service work? Rebalancing?
That would be expected if your next RMD is for 2019. No automatic RMD can be set up for 2019 until your final 2018 balance is known. If my understanding is correct, Vanguard knows that your 2018 RMD was processed by the other custodian.
Enjoying the Outdoors
Re: How exactly does Vanguard's RMD service work? Rebalancing?
Thanks for your response, Electron.
Interesting that you can’t even set up a preference in advance of Jan. 1.
Interesting that you can’t even set up a preference in advance of Jan. 1.
Re: How exactly does Vanguard's RMD service work? Rebalancing?
Hopefully the Edit button will become active in early January. However, I do recall that Vanguard allows setting up the RMD service at age 69 1/2. I don't remember exactly what features can be set up at that time.
https://personal.vanguard.com/us/whatwe ... stribution
You do have to go through several different screens to fully set up the automatic RMD so the previous December 31 balance would be needed.
The RMD can be invested in any of the Vanguard Money Market funds. That choice could provide a lot of flexibility. If I recall correctly, all of your taxable account mutual funds display on one screen and you can specify the RMD percentage invested in each. That feature could help meet your needs.
Enjoying the Outdoors
Re: How exactly does Vanguard's RMD service work? Rebalancing?
Yes, I believe I went thru the RMD service set-up screen when I first opened the Vanguard account. At that time, I had no taxable account, just the IRAs. Now that I’ve set up the taxable account, I’m surprised I can’t edit that option.
Re: How exactly does Vanguard's RMD service work? Rebalancing?
The issue was raised about what happens with the Automatic RMD if changes are made to any of the IRA mutual fund holdings. I'm happy to report that there are checks in the system to handle this situation.
My Automatic RMD was set up and displayed as On Track for distribution during calendar year 2019. I started an online fund exchange that would eliminate one of the funds. An Alert was displayed stating that the automatic exchange service for the fund would be stopped and that the RMD service would not be carried over to the other fund. There was a reminder about RMD requirements and information about the IRS penalty on undistributed RMD.
I was then able to proceed with the exchange. A second Alert was displayed following the exchange with additional information. The RMD Service section on the website indicated that action was needed. I was then able to go through the menus and set up a new Automatic RMD. The revised RMD Confirmation Summary was available for download the following day.
My Automatic RMD was set up and displayed as On Track for distribution during calendar year 2019. I started an online fund exchange that would eliminate one of the funds. An Alert was displayed stating that the automatic exchange service for the fund would be stopped and that the RMD service would not be carried over to the other fund. There was a reminder about RMD requirements and information about the IRS penalty on undistributed RMD.
I was then able to proceed with the exchange. A second Alert was displayed following the exchange with additional information. The RMD Service section on the website indicated that action was needed. I was then able to go through the menus and set up a new Automatic RMD. The revised RMD Confirmation Summary was available for download the following day.
Enjoying the Outdoors