Quick RMD Question

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Topic Author
Brooks
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Joined: Sun Jan 20, 2008 10:14 pm

Quick RMD Question

Post by Brooks » Thu Oct 31, 2019 1:46 pm

I will be 70 ½ in March 2024 and my first RMD will be due on 4/1/2025.

Will the first RMD calculation be based on the IRA balance as of 12/31/2023 or 12/31/2024?

I did find an IRS worksheet but the wording is a little unclear to me.
https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf

Thank you.

Brooks

retired@50
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Re: Quick RMD Question

Post by retired@50 » Thu Oct 31, 2019 1:56 pm

Brooks wrote:
Thu Oct 31, 2019 1:46 pm
I will be 70 ½ in March 2024 and my first RMD will be due on 4/1/2025.

Will the first RMD calculation be based on the IRA balance as of 12/31/2023 or 12/31/2024?

I did find an IRS worksheet but the wording is a little unclear to me.
https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf

Thank you.

Brooks
As I understand it, if you wait until 2025 to take your first RMD, you'll have to take 2 RMDs in that year. One for 2024 and one for 2025. If it were me, I'd take the first RMD in 2024, based on the value 12/31/2023. Best of luck.

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FiveK
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Re: Quick RMD Question

Post by FiveK » Thu Oct 31, 2019 2:08 pm

Brooks wrote:
Thu Oct 31, 2019 1:46 pm
I will be 70 ½ in March 2024 and my first RMD will be due on 4/1/2025.

Will the first RMD calculation be based on the IRA balance as of 12/31/2023 or 12/31/2024?
12/31/2023

The RMD for a given year is based on the 31-Dec balance of the previous year. The only difference for your first RMD is the due date: you get a few extra months to pay it.

kaneohe
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Re: Quick RMD Question

Post by kaneohe » Thu Oct 31, 2019 2:11 pm

"Deadline for receiving required minimum distribution:
 Year you turn age 70 ½ ......................
.......................................................
1. IRA balance on December 31 of the previous year."

I think the relevant words from that link are those above. I agree that the words after 70 1/2 are a bit confusing but I think previous
relates to the yr you turn 70 1/2 (2024) so previous yr is 2023 regardless of when you take RMD.

If you wait till the following April, in addition to paying 2 RMDs that yr, the 2nd RMD will be a bit larger than it would have been
since the IRA had not been depleted of the first RMD by 12/31/24.

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bertilak
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Re: Quick RMD Question

Post by bertilak » Thu Oct 31, 2019 2:18 pm

kaneohe wrote:
Thu Oct 31, 2019 2:11 pm
If you wait till the following April, in addition to paying 2 RMDs that yr, the 2nd RMD will be a bit larger than it would have been
since the IRA had not been depleted of the first RMD by 12/31/24.
Yes, good point.

Also, that 2nd RMD might be in a higher tax bracket.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet

GrowthSeeker
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Re: Quick RMD Question

Post by GrowthSeeker » Thu Oct 31, 2019 4:00 pm

12/31/2023
One reason you might want to delay your first RMD into 2025 (thus requiring 2 RMDs in 2025) would be if you’re doing a Roth conversion in 2024.
Just because you're paranoid doesn't mean they're NOT out to get you.

kaneohe
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Re: Quick RMD Question

Post by kaneohe » Thu Oct 31, 2019 4:14 pm

Also as Alan S. has pointed out previously, the first yr delay until April 1 is not all or nothing..........you can delay any part of that first
distribution ranging from 0% to 100% so depending on your other income, you can tune that % to optimize your particular situation.

Topic Author
Brooks
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Re: Quick RMD Question

Post by Brooks » Thu Oct 31, 2019 4:41 pm

As I understand it you can't really delay your RMD. When you're 70 1/2 you have to take it. I think the penalty is a whopping 50%.

Alan S.
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Re: Quick RMD Question

Post by Alan S. » Thu Oct 31, 2019 5:08 pm

GrowthSeeker wrote:
Thu Oct 31, 2019 4:00 pm
12/31/2023
One reason you might want to delay your first RMD into 2025 (thus requiring 2 RMDs in 2025) would be if you’re doing a Roth conversion in 2024.
This will not work.
A conversion is a distribution and the first distribution in an RMD distribution year is deemed to apply to the RMD. Therefore, if the only distribution in 2024 is a conversion, part of that conversion is the RMD, and that part is not eligible for rollover and becomes an excess regular Roth IRA contribution, which must be removed to avoid a 6% annual excise tax.

In other words, if you want to convert in 2024, you must first complete the RMD for the IRA account from which you want to convert. Then convert an additional amount. Both the RMD and the conversion will be taxable.

For many people, the last conversion they should do would be in 2023. Even more so if they delayed SS benefits to 70.

kaneohe
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Re: Quick RMD Question

Post by kaneohe » Thu Oct 31, 2019 6:16 pm

Brooks wrote:
Thu Oct 31, 2019 4:41 pm
As I understand it you can't really delay your RMD. When you're 70 1/2 you have to take it. I think the penalty is a whopping 50%.
For the first yr only, a delay is allowed until the following April 1.
https://www.irs.gov/retirement-plans/pl ... tions-rmds

GrowthSeeker
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Re: Quick RMD Question

Post by GrowthSeeker » Sat Nov 02, 2019 2:50 am

Alan S. wrote:
Thu Oct 31, 2019 5:08 pm
GrowthSeeker wrote:
Thu Oct 31, 2019 4:00 pm
12/31/2023
One reason you might want to delay your first RMD into 2025 (thus requiring 2 RMDs in 2025) would be if you’re doing a Roth conversion in 2024.
This will not work.
A conversion is a distribution and the first distribution in an RMD distribution year is deemed to apply to the RMD. Therefore, if the only distribution in 2024 is a conversion, part of that conversion is the RMD, and that part is not eligible for rollover and becomes an excess regular Roth IRA contribution, which must be removed to avoid a 6% annual excise tax.

In other words, if you want to convert in 2024, you must first complete the RMD for the IRA account from which you want to convert. Then convert an additional amount. Both the RMD and the conversion will be taxable.

For many people, the last conversion they should do would be in 2023. Even more so if they delayed SS benefits to 70.
I did not realize this. Thank you.
Just because you're paranoid doesn't mean they're NOT out to get you.

MathIsMyWayr
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Location: CA

Re: Quick RMD Question

Post by MathIsMyWayr » Sat Nov 02, 2019 7:00 am

On a silly but practical side, how can I know the balance of my IRA or 401(k) on Dec. 31, last year if I don't keep track of them? Do I have to ask the account custodians, for example, Fidelity?

cherijoh
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Location: Charlotte NC

Re: Quick RMD Question

Post by cherijoh » Sat Nov 02, 2019 7:20 am

MathIsMyWayr wrote:
Sat Nov 02, 2019 7:00 am
On a silly but practical side, how can I know the balance of my IRA or 401(k) on Dec. 31, last year if I don't keep track of them? Do I have to ask the account custodians, for example, Fidelity?
Your custodian should have mailed you an end-of-year statement. If you opted for paperless, it will be posted online under your account.

Topic Author
Brooks
Posts: 55
Joined: Sun Jan 20, 2008 10:14 pm

Re: Quick RMD Question

Post by Brooks » Sat Nov 02, 2019 4:05 pm

kaneohe wrote:
Thu Oct 31, 2019 6:16 pm
Brooks wrote:
Thu Oct 31, 2019 4:41 pm
As I understand it you can't really delay your RMD. When you're 70 1/2 you have to take it. I think the penalty is a whopping 50%.
For the first yr only, a delay is allowed until the following April 1.
https://www.irs.gov/retirement-plans/pl ... tions-rmds
Right. I thought he was saying something else.

trueblueky
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Re: Quick RMD Question

Post by trueblueky » Sat Nov 02, 2019 9:24 pm

kaneohe wrote:
Thu Oct 31, 2019 6:16 pm
Brooks wrote:
Thu Oct 31, 2019 4:41 pm
As I understand it you can't really delay your RMD. When you're 70 1/2 you have to take it. I think the penalty is a whopping 50%.
For the first yr only, a delay is allowed until the following April 1.
https://www.irs.gov/retirement-plans/pl ... tions-rmds
If someone turned 70.5 in March 2019, they would use the 31 December 2018 balance to determine the RMD. They could take it in 2019 or by 1 April 2020. They would need to take another RMD in 2020 based on their 31 December 2019 balance.

So, in most cases, it is better to take the first RMD in 2019 so that 1) there is not a tax year with 2 RMD and 2) the subsequent year's RMD is based on a reduced total. However, individual situations vary.

Not mentioned so far is that you could take part of the first RMD by 31 December 2019 and the rest of it by 1 April 2020. This might may help someone avoid a tax cliff for 2019, or higher Medicare rate in 2021.

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