RMD distribution timing

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my name
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RMD distribution timing

Post by my name » Fri Oct 27, 2017 6:26 am

When do you take your RMD withdrawals, and why? Monthly, quarterly, one lump sum at start of year, or at end of year?

And do you withhold taxes at time of withdrawal - the 10% default or more?

(UPDATED) What do you do with your distribution?
Last edited by my name on Fri Oct 27, 2017 7:22 am, edited 1 time in total.

scrabbler1
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Re: RMD distribution timing

Post by scrabbler1 » Fri Oct 27, 2017 6:50 am

My friend, 54, has an inherited IRA after his remaining parent died 5 years ago, and I help him out managing his financial stuff. I have him take his RMD near the end of the year and use it to pay income taxes (federal nd state) from the income generated from the brokerage account he inherited along with the IRA. By doing the RMD near the end of the year, I have the best estimate of what his overall income tax bills will be. In some years, there was leftover cash from the RMD, so we used it partially fund his annual Roth IRA purchase (think of it as a backhanded Roth IRA conversion).

Uniballer
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Re: RMD distribution timing

Post by Uniballer » Fri Oct 27, 2017 7:14 am

I am too young for RMDs, but I have convinced my parents to make their charitable contributions via QCDs, and then take any remaining RMD near the end of the year. The QCDs do not count as income, so it helps them to stay in the 15% tax bracket.

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Re: RMD distribution timing

Post by RadAudit » Fri Oct 27, 2017 7:18 am

Early in Dec. And, I take taxes out of the RMDs.

Additionally, I have about driven the Feds withholding to zero on the pensions. Seems to be working, so far.
Last edited by RadAudit on Fri Oct 27, 2017 7:20 am, edited 1 time in total.
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Sheepdog
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Re: RMD distribution timing

Post by Sheepdog » Fri Oct 27, 2017 7:19 am

About 2/3 of my RMD (which will be 6.78% next year) goes to annual planned QCDs (qualified charitable distributions) spread over the year. The remainder is taken out in January to be added to my taxable short term investment grade bond fund for expenses as needed and is part of my safe haven fund. Nothing is taken out for taxes as I seldom owe any. 8-)
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John Z
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Re: RMD distribution timing

Post by John Z » Fri Oct 27, 2017 8:04 am

We take ours roughly quarterly and only have taxes withheld on the last withdrawal in the 4th quarter. We estimate our taxes then and use that to determine how much to have withheld. The IRS allows you to take your entire year's total tax withholding at the end of the year so that's what we do. We put the money into checking for expenses.

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Re: RMD distribution timing

Post by RudyS » Fri Oct 27, 2017 8:44 am

Where's the RMD coming from? stocks or bonds? If bonds, then it won't matter too much when you take it. If stocks, here's your chance to do market timing! Market going to fall? Take RMD now. Market going to rise? Wait till December. Only partially in jest.

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friar1610
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Re: RMD distribution timing

Post by friar1610 » Fri Oct 27, 2017 1:11 pm

My wife and I have relatively modest IRAs of roughly the same size. They are both 100% VG Total Bond Index. We have them set up so each of us takes the distributions semi-annually but staggered so there is one distribution each quarter. We have taxes taken out at close to our 25% tax bracket plus state. We don't need the money for living expenses so we have it transferred to our VG joint taxable MM fund. From there I redistribute to either our taxable Total Bond or Total Stock fund, depending on what's needed to maintain AA. This year I also did my first QCD and assuming everything works out come tax time I'll probably continue to do so annually (instead of donating appreciated taxable MF shares as I've done in the past).
Last edited by friar1610 on Sat Oct 28, 2017 5:34 pm, edited 1 time in total.
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The Wizard
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Re: RMD distribution timing

Post by The Wizard » Fri Oct 27, 2017 1:13 pm

I'm just a young lad of 67, so not taking RMDs yet.
But I've been doing monthly withdrawals from tax sheltered in lieu of SS since age 63.
So when I hit 70 in 2020, my plan is to continue monthly withdrawals of my RMD amount on the 20th of each month.
The amount should be less than what I'm presently taking, but with SS the total will be more...

ubermax
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Re: RMD distribution timing

Post by ubermax » Fri Oct 27, 2017 1:14 pm

All our inflows are monthly , i.e. SS, Pension, & RMD (no tax withheld) and they populate a budget spreadsheet with various buckets when received - early in the year we know health premiums and the RMD and use prior year's information for the unknowns to estimate our tax liability and budget for the year - tax liability is treated just like any other item on our budget sheet , e.g. electric bill and we make estimated quarterlies - also if we need to exceed our RMD for the year from tax deferred accounts then we withdraw enough from assets to cover an estimate of the tax bite also.

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Re: RMD distribution timing

Post by HIinvestor » Fri Oct 27, 2017 2:01 pm

We generally take ours in the last quarter of the year, just so it helps us figure out how much money we can gift via charitable donations and gifts to our kids and loved ones. It works well for us. We also tend to get dividends around then as well. It makes the gift-giving season jollier. LOL! :moneybag :D

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CABob
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Re: RMD distribution timing

Post by CABob » Fri Oct 27, 2017 2:16 pm

As a matter of fact my RMD is scheduled for today. Prior to today I have taken some QCDs and today's RMD will reflect the balance including withholding tax which hopefully will be approximately what will be owed for the year and at least enough to avoid any penalty. I prefer to take the RMD in a single payment late in the year but with enough time to correct any mistakes.
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mickeyd
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Re: RMD distribution timing

Post by mickeyd » Fri Oct 27, 2017 2:20 pm

If the stock market is at all-time high during summer or later, I take half off of the table at that time and take the balance prior to the end of the year. So far I have only taken distribution from my booming equity investments.

I have been stashing the proceeds in cash as I have a costly event approaching.
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sport
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Re: RMD distribution timing

Post by sport » Fri Oct 27, 2017 2:33 pm

With interest rates low, and the stock market high, I want to minimize risk with my RMD money. So, early in the year, I put that money into Vanguard's Ultra Short Term Bond Fund, within my IRA. During the year, I make QCDs from that fund. Some time in November, I will withdraw the balance of the RMD and withhold for federal taxes. Vanguard will not withhold for Ohio income taxes, despite my complaints. :annoyed

Determined
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Re: RMD distribution timing

Post by Determined » Fri Oct 27, 2017 3:20 pm

sport wrote:
Fri Oct 27, 2017 2:33 pm
With interest rates low, and the stock market high, I want to minimize risk with my RMD money. So, early in the year, I put that money into Vanguard's Ultra Short Term Bond Fund, within my IRA. During the year, I make QCDs from that fund. Some time in November, I will withdraw the balance of the RMD and withhold for federal taxes. Vanguard will not withhold for Ohio income taxes, despite my complaints. :annoyed
That is good to know about Ohio. I will be taking inherited RMDs next year.

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Watty
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Re: RMD distribution timing

Post by Watty » Fri Oct 27, 2017 3:31 pm

There have been a lot of threads about this with no clear consensus.

As some people have mentioned doing them late in the year can have some tax advantages.

Some things to keep in mind if you do it late in the year are;

1) If there are any problems there is less time to get it straightened out.

2) If you or a spouse are in the hospital in December the RMD might not get done. It is not unheard of for people to just forget to do the RMD especially when they are older and may be less financially competent.

3) The RMD needs to be done in the year that you die so by doing it late in the year you will likely be complicating the finances for your heirs.

When I get to that point if there is not a compelling reason for me to do it late in the year I plan to have it setup to automatically be done early in the year just for simplicity. By doing the RMD done early in the year you will also likely remember to check on them by the time you file your taxes on April 15th.

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Re: RMD distribution timing

Post by F150HD » Fri Oct 27, 2017 3:47 pm

If the stock market is at all-time high during summer or later, I take half off of the table at that time and take the balance prior to the end of the year. So far I have only taken distribution from my booming equity investments.
Similar here. I would normally take at year end (inherited acct), but the market screaming up, I took mine this summer.

Use the funds to fund my Roth in the following year.

Why do some places/sites call them "RMDs" (which I use) while others call them "MRDs"? Just adds to confusion IMO.

DarthSage
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Re: RMD distribution timing

Post by DarthSage » Fri Oct 27, 2017 4:22 pm

Watty wrote:
Fri Oct 27, 2017 3:31 pm
There have been a lot of threads about this with no clear consensus.

As some people have mentioned doing them late in the year can have some tax advantages.

Some things to keep in mind if you do it late in the year are;

1) If there are any problems there is less time to get it straightened out.

2) If you or a spouse are in the hospital in December the RMD might not get done. It is not unheard of for people to just forget to do the RMD especially when they are older and may be less financially competent.

3) The RMD needs to be done in the year that you die so by doing it late in the year you will likely be complicating the finances for your heirs.

When I get to that point if there is not a compelling reason for me to do it late in the year I plan to have it setup to automatically be done early in the year just for simplicity. By doing the RMD done early in the year you will also likely remember to check on them by the time you file your taxes on April 15th.
These are exactly the reasons why we're planning on early-year RMDs. MIL died this July, so we're currently in the process of doing the IRA distribution to the heirs, but DH will have to start his RMDs next year. I figure, in January, you're thinking about finances, taxes, etc., so doing the RMD "fits". I know a lot of people pick 12/1--I can see it making sense, for some, but if you get busy with the holidays and forget, you're hosed. DH and I settled on him doing the RMDs in early Feb.--on his (late) father's birthday. It works for us, and DH will never forget.

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CABob
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Re: RMD distribution timing

Post by CABob » Fri Oct 27, 2017 5:05 pm

Why do some places/sites call them "RMDs" (which I use) while others call them "MRDs"? Just adds to confusion IMO.
I could be wrong but I think MRD is a term that Fidelity uses and since they are a large broker a lot of folks pick up their use of the term. OTOH most of the rest of the world including the IRS uses the term RMD.
Bob

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Re: RMD distribution timing

Post by minesweep » Fri Oct 27, 2017 6:19 pm

I take my RMD in mid-December and withhold 100% of my safe harbor tax payment at that time as well. I have all bonds in my TIRA (25% of my total portfolio) so It doesn’t matter much what time of the year I take the RMD but I don’t like sending the IRS my estimated taxes until its necessary. It’s too bad that Vanguard doesn’t allow investors to withhold state taxes for the states that don’t currently require it. I received a survey last month from Vanguard. They asked “what is the one thing I would like Vanguard to do that it doesn’t do now”. That was my request.

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Re: RMD distribution timing

Post by Jill07 » Fri Oct 27, 2017 6:56 pm

If you are required to take your RMD, I think it it is best to take it in January. Consider your survivors. My Father passed away in late November. I was very grateful that my Father kept good records & noted that the RMDs had been taken in January. It was one less thing I had to worry about, when helping my Mother deal with everything. He should have had many years left.. but you just don't know. There is another recent thread here on the complications of inherited IRA's and RMDs not taken prior to death. I think it is best to keep it simple & not worry about maximizing taxes, etc.

Jill

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celia
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Re: RMD distribution timing

Post by celia » Fri Oct 27, 2017 7:19 pm

We have Inherited IRAs and tend to take the RMDs (and some excess distributions) from the traditional IRA early in the year to help draw down the account faster. We withdraw in-kind and let the growth happen in taxable instead. This helps the balance to go down faster so that we don't have as much in there when SS starts.

For the Roth, we tend to withdraw later in the year when the markets seem at a high. Here we want the balance to grow in the Inherited Roth as much as possible.

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Re: RMD distribution timing

Post by MarkNYC » Fri Oct 27, 2017 8:14 pm

CABob wrote:
Fri Oct 27, 2017 5:05 pm
Why do some places/sites call them "RMDs" (which I use) while others call them "MRDs"? Just adds to confusion IMO.
I could be wrong but I think MRD is a term that Fidelity uses and since they are a large broker a lot of folks pick up their use of the term. OTOH most of the rest of the world including the IRS uses the term RMD.
Although the IRS uses RMD, Natalie Choate, who is a highly-regarded author and expert on retirement plan distributions, prefers to use MRD. Her reason for doing so is to avoid confusion between two similar abbreviations related to the same subject: RMD and RBD (Required Beginning Date).

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Re: RMD distribution timing

Post by joe8d » Fri Oct 27, 2017 8:29 pm

First Q reinvest date for TSM.TSM from IRA goes into Taxable TSM.
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Re: RMD distribution timing

Post by sport » Fri Oct 27, 2017 9:14 pm

I see that a number of Bogleheads take their RMD early in the year. It should be noted that reduces the ability to make QCDs that are part of the RMD. If you make charitable donations, that may be giving up a significant tax break. At least for my state, QCDs are better than itemized deductions because they decrease your AGI, which in turn, decreases state income taxes.

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Re: RMD distribution timing

Post by The Wizard » Fri Oct 27, 2017 9:20 pm

joe8d wrote:
Fri Oct 27, 2017 8:29 pm
First Q reinvest date for TSM.TSM from IRA goes into Taxable TSM.
This isn't really helping to clarify the RMD question...
Attempted new signature...

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mickeyd
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Re: RMD distribution timing

Post by mickeyd » Sat Oct 28, 2017 3:07 pm

Why do some places/sites call them "RMDs" (which I use) while others call them "MRDs"? Just adds to confusion IMO.
When I was reading IRS documents a few years ago regarding the subject, they used both acronyms interchangeably in the docs. I took it to mean that either was acceptable to use. I chose RMD to use from that point on and I notice that most folks seem to use that also. I agree that it adds to the confusion.
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joe8d
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Re: RMD distribution timing

Post by joe8d » Sat Oct 28, 2017 9:40 pm

The Wizard wrote:
Fri Oct 27, 2017 9:20 pm
joe8d wrote:
Fri Oct 27, 2017 8:29 pm
First Q reinvest date for TSM.TSM from IRA goes into Taxable TSM.
This isn't really helping to clarify the RMD question...
I'm sorry, but I think I answered the OP's question.
All the Best, | Joe

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Re: RMD distribution timing

Post by The Wizard » Sat Oct 28, 2017 9:56 pm

joe8d wrote:
Sat Oct 28, 2017 9:40 pm
The Wizard wrote:
Fri Oct 27, 2017 9:20 pm
joe8d wrote:
Fri Oct 27, 2017 8:29 pm
First Q reinvest date for TSM.TSM from IRA goes into Taxable TSM.
This isn't really helping to clarify the RMD question...
I'm sorry, but I think I answered the OP's question.
Ok, no problem then...
Attempted new signature...

Alan S.
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Re: RMD distribution timing

Post by Alan S. » Sat Oct 28, 2017 11:33 pm

Here is a quote from 2001 that seems to make sense. The IRS application of the term required minimum distributions triggered the change at the time the 2001 RMD changes were proposed. Those became effective in 2002.
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It never was MRD. That is probably just a term used by some people as shorthand. The law and proposed regulations from 1987 only refer to "required distributions." there is no "minimum" in any of the language, nor is there any reference to an acronym.
However, in the newly proposed regulations issued in January 2001, they use the term "required minimum distribution" over and over again (even in the titles of the regulations). They never use the acronym RMD, like they do with MDIB (minimum distribution incidental benefit), which was used in both the 1987 and 2001 proposed regulations.

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Re: RMD distribution timing

Post by daveydoo » Sat Oct 28, 2017 11:40 pm

If you're seriously ill -- or just have a bad feeling -- take your RMD early in the year so that your heirs don't have to take it after your death using your life expectancy table but at their high marginal rates.
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Garco
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Re: RMD distribution timing

Post by Garco » Wed Nov 08, 2017 5:39 pm

I like to spread the risk and the income across the year. So I take my RMD's near the end of each quarter; I pay state and federal income taxes at the time of each distribution. Since I'm also receiving Social Security, I have a monthly income as well. If I need more cash for some reason -- a purchase or an urgent medical cost or whatever -- I can also take it temporarily out of savings, since I keep a cache of cash for this purpose in a money market fund. No immediate sales of investments for this purpose.

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Re: RMD distribution timing

Post by 123 » Wed Nov 08, 2017 7:36 pm

Jill07 wrote:
Fri Oct 27, 2017 6:56 pm
If you are required to take your RMD, I think it it is best to take it in January. Consider your survivors...
+1000% We have inherited IRAs and have automatic RMDs set for them very early in the year to minimize issues for those that likely inherit them.
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