rmd disaster

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oldnewbie
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Joined: Fri May 24, 2013 2:05 pm

rmd disaster

Post by oldnewbie » Tue Feb 13, 2018 12:17 am

Help I missed my first rmd deadline in january from my 401k. I think vanguard may have bought an annuity with the funds.Is there any hope? freaking out

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Flobes
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Joined: Tue Feb 16, 2010 12:40 am

Re: rmd disaster

Post by Flobes » Tue Feb 13, 2018 12:39 am

oldnewbie wrote:
Tue Feb 13, 2018 12:17 am
freaking out
Take a deep breath.
oldnewbie wrote:
Tue Feb 13, 2018 12:17 am
I missed my first rmd deadline in january from my 401k.
Missing an RMD is fixable. There are no RMDs due in January. Please clarify.
oldnewbie wrote:
Tue Feb 13, 2018 12:17 am
I think vanguard may have bought an annuity with the funds.
What does this mean? You bought something at Vanguard? With some or all of your 401k money? Please elaborate.

mhalley
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Joined: Tue Nov 20, 2007 6:02 am

Re: rmd disaster

Post by mhalley » Tue Feb 13, 2018 12:43 am

Don’t panic. I believe rmds are due by dec 31 of the year you turn 70.5, not due in January. More Concerning is that you don’t seem to know how your funds are invested.
From the IRS website:
. When must I receive my required minimum distribution from my IRA?

You must take your first required minimum distribution for the year in which you turn age 70½. However, the first payment can be delayed until April 1 of the year following the year in which you turn 70½. For all subsequent years, including the year in which you were paid the first RMD by April 1, you must take the RMD by December 31 of the year.
https://www.irs.gov/retirement-plans/re ... ibutions#3

oldnewbie
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Re: rmd disaster

Post by oldnewbie » Tue Feb 13, 2018 12:53 am

I turned 70 1/2 in january but did not take a distribution due to confusion,stupidity.In the cover letter which I got in december, the talk about 30 day deadlines and how they will buy an annuity if they do not get the completed forms in time
I called vanguard in december about this but they said i had till the end of this year to file. very confused

oldnewbie
Posts: 26
Joined: Fri May 24, 2013 2:05 pm

Re: rmd disaster

Post by oldnewbie » Tue Feb 13, 2018 12:55 am

i am in a stable income fund but when i ask for my rmd amount the tool says to call the company since there are no funds

oldnewbie
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Re: rmd disaster

Post by oldnewbie » Tue Feb 13, 2018 12:58 am

isn't my papework due in january?

Finridge
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Re: rmd disaster

Post by Finridge » Tue Feb 13, 2018 1:05 am

Stop freaking out. Get some sleep and call Vanguard in the morning. There is no sense freaking out and until you know what is happening.

Also, even if you did miss taking the RMD, it's probably OK. if that happens, you ask the IRS nicely to waive the penalty. You explain that it was the first RMD and your missing it was inadvertent. They will probably waive it.

oldnewbie
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Joined: Fri May 24, 2013 2:05 pm

Re: rmd disaster

Post by oldnewbie » Tue Feb 13, 2018 1:18 am

thanks for the repllies
Can vanguard purchase an annuity in a situation like mine?
I will sleep shortly.

mhalley
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Joined: Tue Nov 20, 2007 6:02 am

Re: rmd disaster

Post by mhalley » Tue Feb 13, 2018 1:38 am

Vanguard has a free rmd service.
https://personal.vanguard.com/us/whatwe ... stribution
I don’t think any paperwork is required until next years taxes are due.
If you turned 70.5 in January 2018 no rmds are due till dec 31 2018. Vanguard doesn’t purchase an annuity unless you tell them to.

Finridge
Posts: 311
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Re: rmd disaster

Post by Finridge » Tue Feb 13, 2018 1:45 am

oldnewbie wrote:
Tue Feb 13, 2018 1:18 am
thanks for the repllies
Can vanguard purchase an annuity in a situation like mine?
I will sleep shortly.
Vanguard has been handling my RMD's. They tell me what the RMD is. The also have a service where you can calendar with RMD's to take place automatically.

I've never seen anything from them where if you didn't take it by a certain time, they'd take the money out and buy an annuity. That does not sound right to me. If you don't have their automatic service, and didn't take it, then the RMD likely didn't happen. Not the end of the world, if it is the first time, as you will probably be able to have the penalty waived.

Finridge
Posts: 311
Joined: Mon May 16, 2011 7:27 pm

Re: rmd disaster

Post by Finridge » Tue Feb 13, 2018 1:47 am

https://www.investopedia.com/articles/r ... 102203.asp


When You Must Begin
Generally, your first RMD is due for the year you reach age 70.5. However, you need not start receiving distributions from your retirement account until your required beginning date (RBD). Generally, your RBD is April 1 of the year following the year you reach age 70.5. If you are still employed at age 70.5 and you participate in a qualified plan, 403(b) governmental 457(b) account, you may be allowed to defer the start of your RMDs until after you retire. This exception, however, does not apply if you own at least 5% of the business that adopted the plan. Your plan administrator should be able to tell you if the plan allows this deferment.

Age 70.5 Determination
Determining when you reach age 70.5 is as important as it is easy. The RMD regulations explain that you reach age 70.5 six months after the 70th anniversary of your birth. For example, if your date of birth is June 30, 1943, the 70th anniversary of your birth date is June 30, 2013, and you reach age 70.5 on December 30, 2013. Since you reach age 70.5 during 2013, your first RMD must be distributed by April 1, 2014. If you reach age 70 between July 1, 2013, and December 31, 2013, then you become 70.5 during 2014, and your RBD is April 1, 2015.

Example 1
Jack and Jill both own IRAs. Jack was born on June 30, 1943. Jill was born on July 1, 1943. They both reach age 70 in 2013 but 70.5 in different years: Jack reaches 70.5 on December 30, 2013, and Jill on January 1, 2014. Jack must therefore begin his RMD by April 1, 2014, while Jill may wait until April 1, 2015.

Subsequent RMDs
Only the first RMD may be delayed until April 1 of the following year. All subsequent RMDs must be distributed by December 31 of the year to which it applies. If in the above example Jack took his 2013 RMD on April 1, 2014, he would also be required to take his 2014 RMD by December 31, 2014. This means that Jack would have had to include both RMDs in his income for 2014, the year in which the distributions occurred.

oldnewbie
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Joined: Fri May 24, 2013 2:05 pm

Re: rmd disaster

Post by oldnewbie » Tue Feb 13, 2018 2:14 am

THANKS AGAIN
It looks like they purchased a tsa with my 401k money following plan rules.
I will ask if this is reversible the plan rules look very murky when talking about filling out vanguard forms when getting to age 70 1/2

22twain
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Re: rmd disaster

Post by 22twain » Tue Feb 13, 2018 2:22 am

Have you received the first annuity payment yet?

oldnewbie
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Re: rmd disaster

Post by oldnewbie » Tue Feb 13, 2018 2:33 am

No i have not

Finridge
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Re: rmd disaster

Post by Finridge » Tue Feb 13, 2018 2:16 pm

oldnewbie wrote:
Tue Feb 13, 2018 2:14 am
THANKS AGAIN
It looks like they purchased a tsa with my 401k money following plan rules.
I will ask if this is reversible the plan rules look very murky when talking about filling out vanguard forms when getting to age 70 1/2
So the "if we buy an annuity if we don't hear from you" is a rule in your 401(k) plan, and not something that Vanguard did on their own?

It still sounds kind of shady to me. You should look into having it reversed, ASAP. Unless, on reflection, you decide that you are better of with the annuity. But jump on this right away, and don't be afraid to escalate to a manager.

Admiral
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Re: rmd disaster

Post by Admiral » Tue Feb 13, 2018 2:21 pm

oldnewbie wrote:
Tue Feb 13, 2018 2:14 am
THANKS AGAIN
It looks like they purchased a tsa with my 401k money following plan rules.
I will ask if this is reversible the plan rules look very murky when talking about filling out vanguard forms when getting to age 70 1/2
A third party can purchase an annuity with your funds and you as the beneficiary without a requirement that you sign the contract? Or give them power of attorney?

That sounds impossible...?

WhiteMaxima
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Re: rmd disaster

Post by WhiteMaxima » Tue Feb 13, 2018 2:24 pm

I can't believe you missed RMD. I would recommend take RMD before the deadline to avoid penalty. Why not start taking at 69? I know many BH want to maximize the return of pre-tax asset. But too little of tolerance will end of diaster.

inbox788
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Re: rmd disaster

Post by inbox788 » Tue Feb 13, 2018 2:38 pm

oldnewbie wrote:
Tue Feb 13, 2018 12:53 am
I turned 70 1/2 in january but did not take a distribution due to confusion,stupidity.In the cover letter which I got in december, the talk about 30 day deadlines and how they will buy an annuity if they do not get the completed forms in time
I called vanguard in december about this but they said i had till the end of this year to file. very confused
So you just turned 70 1/2 January 2018? Then you should have plenty of time.

Is this an IRA or 401k or other?

Is this account at Vanguard? What type? Managed? Do you have some sort of automatic arrangement set up?

This part about buying an annuity makes no sense, can you please elaborate as to what's occurring? Again, is this all happening at Vanguard with a personal account? Very odd...
oldnewbie wrote:
Tue Feb 13, 2018 2:14 am
It looks like they purchased a tsa with my 401k money following plan rules.
I will ask if this is reversible the plan rules look very murky when talking about filling out vanguard forms when getting to age 70 1/2
Who? Vanguard advisor? tsa = tax sheltered annuity? Who runs your 401k plan? Prior employer? What is the company. I haven't heard about this before...guess it's better than letting you get in to tax penalty, but writing a check seems like the least harmful thing to do. The 401k plan manager must be making out on these automatic annuities.

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Epsilon Delta
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Re: rmd disaster

Post by Epsilon Delta » Tue Feb 13, 2018 3:13 pm

Finridge wrote:
Tue Feb 13, 2018 2:16 pm
oldnewbie wrote:
Tue Feb 13, 2018 2:14 am
THANKS AGAIN
It looks like they purchased a tsa with my 401k money following plan rules.
I will ask if this is reversible the plan rules look very murky when talking about filling out vanguard forms when getting to age 70 1/2
So the "if we buy an annuity if we don't hear from you" is a rule in your 401(k) plan, and not something that Vanguard did on their own?
I will second oldnewbie. It sounds like this is a rule of his particular 401(k) rather than an tax rule and needs to be handled with the 401(k) administrators and within the context of the particular 401(k)s rules. Most of the posts in this thread are discussing the tax code and completely missing the point.

Nowizard
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Re: rmd disaster

Post by Nowizard » Tue Feb 13, 2018 5:20 pm

White Maxima: Unless something has changed, taking an RMD early will not affect the requirement to take one when reaching the required age, just reduce the amount in the pot from which the RMD is taken.
Also, a BIL was a financial planner for many years before retirement. He said he never had a client who was actually charged the penalty for missing a RMD, including himself.

Tim

oldnewbie
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Joined: Fri May 24, 2013 2:05 pm

Re: rmd disaster

Post by oldnewbie » Tue Feb 13, 2018 6:09 pm

I talked to Vanguard this morning and what they’re telling me is that I am good until my birthday in July when I reach 71 ,At which time if I still haven’t returned paperwork they will buy an irrevocable annuity Per plan rules .
Breathing a sigh of relief thank U all for help during some anxious hours last night .
I hope What they are telling me is correct and will certainly get the paperwork finished quickly .

Alan S.
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Location: Prescott, AZ

Re: rmd disaster

Post by Alan S. » Tue Feb 13, 2018 6:19 pm

Given this plan's potential restrictions and rules, I suggest doing a direct rollover (avoids withholding) to an IRA account.

You can open an IRA at most large firms and they will assist with the rollover process from this plan. However, the plan MUST distribute your 2018 RMD to you before rolling over the rest of the account. Then your first RMD from the IRA will be for 2019, due by 12/31/2019, and based on the 12/31/2018 IRA value.

jrbdmb
Posts: 227
Joined: Tue Oct 06, 2015 4:27 pm

Re: rmd disaster

Post by jrbdmb » Wed Feb 14, 2018 2:30 pm

Alan S. wrote:
Tue Feb 13, 2018 6:19 pm
Given this plan's potential restrictions and rules, I suggest doing a direct rollover (avoids withholding) to an IRA account.

You can open an IRA at most large firms and they will assist with the rollover process from this plan. However, the plan MUST distribute your 2018 RMD to you before rolling over the rest of the account. Then your first RMD from the IRA will be for 2019, due by 12/31/2019, and based on the 12/31/2018 IRA value.
Please investigate IRA protection rules in your state before considering rolling over your 401K to an IRA. 401Ks are protected by federal law from being attacked by lawsuits, etc. IRAs are protected by state law, and some states allow a plaintiff to go after your IRA funds, or for creditors to go after IRA funds in a bankruptcy. CA in particular is a state that allows plaintiffs or creditors to go after your IRA.

http://www.latimes.com/la-ira-story3-story.html

Alan S.
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Location: Prescott, AZ

Re: rmd disaster

Post by Alan S. » Wed Feb 14, 2018 3:41 pm

jrbdmb wrote:
Wed Feb 14, 2018 2:30 pm
Alan S. wrote:
Tue Feb 13, 2018 6:19 pm
Given this plan's potential restrictions and rules, I suggest doing a direct rollover (avoids withholding) to an IRA account.

You can open an IRA at most large firms and they will assist with the rollover process from this plan. However, the plan MUST distribute your 2018 RMD to you before rolling over the rest of the account. Then your first RMD from the IRA will be for 2019, due by 12/31/2019, and based on the 12/31/2018 IRA value.
Please investigate IRA protection rules in your state before considering rolling over your 401K to an IRA. 401Ks are protected by federal law from being attacked by lawsuits, etc. IRAs are protected by state law, and some states allow a plaintiff to go after your IRA funds, or for creditors to go after IRA funds in a bankruptcy. CA in particular is a state that allows plaintiffs or creditors to go after your IRA.

http://www.latimes.com/la-ira-story3-story.html
Not your rollover IRA, per this court finding: https://www.courtlistener.com/opinion/2 ... v-haycock/
But the direct rollover should not be done into an existing contributary IRA to avoid having to be concerned with contribution tracing. Also, if your total IRA assets are not over 100k, the court is not likely to award any of it to creditors since at least that much is needed to sustain a basic life style.

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