Inherited RMD Reminders
Inherited RMD Reminders
This is a cautionary tale, and a public plea for Vanguard to consider changing a policy regarding RMDs. My father died in late November 2018 and had IRAs with two different entities. I withdrew my father's 2018 RMD and then transferred both accounts to VG. Vanguard combined them both in a single Inherited IRA account. And there the money sat until a week ago, when I realized I had forgotten to take an RMD for 2019. I immediately went online and withdrew the RMD amount and emailed VG asking why I had not received a tickler from them about the RMD. Here is an excerpted reply:
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Thank you for contacting us with your inquiry.
If there is a calculation set up on the IRAs, whether inherited or not, a
notification is sent out at the beginning of the year reminding you of the
necessary distribution that year.
If your inherited IRA has not had the Required Minimum Distribution (RMD)
calculated yet, please give us a call at your earliest convenience and we
will gladly assist.
When you reach the age of 70 1/2 or reach the year in which you are going
to turn 70 1/2, we should automatically calculate your traditional IRA RMD
and send you a notification at the beginning of the year.
There is a feature in your RMD Service page that allows you to set up
automatic distributions on specified dates or a specified date. If you
would like to discuss the options available to you for this service, please
give us a call.
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In other words, when you turn 70-1/2 we'll make sure you know about RMDs, but if you inherit an IRA before age 70-1/2 (my case) you're on your own. Would it be that difficult of a programming change to have the system generate a canned email to be sent out during the first week of January every year to ANYONE with an inherited IRA who hasn't set up some sort of automatic RMD calculation and withdrawal?
Anyway, a lot of us are losing our parents and likely inheriting IRAs, so please take note and don't forget your RMD even though you may only be 66 years old. Hopefully Vanguard will sooner or later start helping us a little more with this....
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Thank you for contacting us with your inquiry.
If there is a calculation set up on the IRAs, whether inherited or not, a
notification is sent out at the beginning of the year reminding you of the
necessary distribution that year.
If your inherited IRA has not had the Required Minimum Distribution (RMD)
calculated yet, please give us a call at your earliest convenience and we
will gladly assist.
When you reach the age of 70 1/2 or reach the year in which you are going
to turn 70 1/2, we should automatically calculate your traditional IRA RMD
and send you a notification at the beginning of the year.
There is a feature in your RMD Service page that allows you to set up
automatic distributions on specified dates or a specified date. If you
would like to discuss the options available to you for this service, please
give us a call.
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In other words, when you turn 70-1/2 we'll make sure you know about RMDs, but if you inherit an IRA before age 70-1/2 (my case) you're on your own. Would it be that difficult of a programming change to have the system generate a canned email to be sent out during the first week of January every year to ANYONE with an inherited IRA who hasn't set up some sort of automatic RMD calculation and withdrawal?
Anyway, a lot of us are losing our parents and likely inheriting IRAs, so please take note and don't forget your RMD even though you may only be 66 years old. Hopefully Vanguard will sooner or later start helping us a little more with this....
Re: Inherited RMD Reminders
I am 90% certain that I will forget an RMD from an inherited account over the next 15 years. I'd rather it be automated at the end of year.
Re: Inherited RMD Reminders
I received an annual notification from Vanguard in January of each year regarding my required RMD on my inherited IRA and the amount I need to withdraw. I have been receiving these since my mother passed in 2013. I was only 60 at the time, so it was not tied to me being 70.5 years old.
Re: Inherited RMD Reminders
There have been threads before about how to handle missed RMDs that you can look up.
Be sure to look up those posts since there will be explanations of how to send in a form and plead for an exception to the penalty if it was an honest mistake. It sounds like the IRS has been pretty lenient with not charging the penalty for people that contact them first and admit the mistake with some plausible reason.
Be sure to look up those posts since there will be explanations of how to send in a form and plead for an exception to the penalty if it was an honest mistake. It sounds like the IRS has been pretty lenient with not charging the penalty for people that contact them first and admit the mistake with some plausible reason.
Re: Inherited RMD Reminders
I'll be interested to hear if there are custodians that do do this. The one I had my inherited IRA at prior to Vanguard didn't either. Vanguard does remind you if you look at the RMD section, but obviously that doesn't help unless you're already thinking to look.
I think this one's a taste call though, frankly; I can see that it would help to have a reminder but I don't know that I'd consider it their obligation to provide one.
I think this one's a taste call though, frankly; I can see that it would help to have a reminder but I don't know that I'd consider it their obligation to provide one.
Re: Inherited RMD Reminders
You probably didn't have the account with them long enough for their calculators to catch up. Did they label it properly? My Fideility ones say BDA to indicated inherited so that they get the right calculation. I've had my mom's now for over a year and I got my first RMD calculation last week. It matched my spreadsheet.
Re: Inherited RMD Reminders
I took my inherited IRA RMD late this year (2nd week of December or so), because I wanted to figure out how much taxes to withhold to reach Safe Harbor.
I got a call from "my guy(*)" at Schwab in November to remind me to take it. I didn't get any kind of automated reminder, though. Maybe I would have if I let it go even later.
I also had a reminder in my calendar for the RMD to make sure I didn't forget.
I'd advise everybody who uses a calendar app of some kind to just put a reminder in there about the RMD. Have it repeat annually....
(*) "My guy" is some guy from the local office who calls me once in a while, but I have never done any investing with him directly. I have never met him as far as I know. I just do everything online, except a few times when I was transferring an account and I went into the office to make sure I was doing it right.
I got a call from "my guy(*)" at Schwab in November to remind me to take it. I didn't get any kind of automated reminder, though. Maybe I would have if I let it go even later.
I also had a reminder in my calendar for the RMD to make sure I didn't forget.
I'd advise everybody who uses a calendar app of some kind to just put a reminder in there about the RMD. Have it repeat annually....
(*) "My guy" is some guy from the local office who calls me once in a while, but I have never done any investing with him directly. I have never met him as far as I know. I just do everything online, except a few times when I was transferring an account and I went into the office to make sure I was doing it right.
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Re: Inherited RMD Reminders
Automated RMD isn't great because you want to take it when the market is high. If you're forgetful you should definitely get on the automated program though.
Age 31: |
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Re: Inherited RMD Reminders
Your inherited IRA custodian could remind you, but in many situations they do not know the prior history of the IRA that effects the inherited IRA RMD.
Here are just some of the situations that cause the inherited IRA RMD to differ from the simple LE divisor (Table I age of beneficiary divisor in year after the year of death reduced by 1.0 for each subsequent year.
1) Inherited IRA assigned out of estate by executor, owner passed prior to RBD - 5 year rule applies
2) Same, except owner passed after RBD - remaining LE of owner applies
3) Multiple individual beneficiaries and separate accounts not created by the deadline - oldest beneficiary age applies
4) IRA included a charitable beneficiary that was not paid off by the beneficiary determination date - 5 year rule or owner LE applies
5) NQ trust inherited IRA and trustee assigned IRA out of the trust - 5 year rule or owner LE applies
6) Qualified trust and trustee assigned IRA out of trust - oldest trust beneficiary age applies
7) Inherited QRP with 5 year rule default and owner passed prior to RBD, direct rollover to inherited IRA after deadline - 5 year rule applies
8) Inherited QRP with LE default, death reported late and age of oldest beneficiary applies.
9) Beneficiary is successor beneficiary of already inherited plan from non spouse -RMD schedule of original beneficiary applies.
10) Beneficiary is successor beneficiary of plan originally inherited from spouse - need to determine if surviving spouse defaulted to ownership status by failing to take full beneficiary RMD - current beneficiary is then a designated beneficiary, not a successor.
11) IRAs inherited from same original decedent can aggregate the inherited IRA RMD.
12) Inherited IRAs combined in error with other inherited IRAs would require the higher of the RMDs.
13) IRA inherited after 2019 - Secure Act 10 year rule comes into play; determining which beneficiaries are "eligible" comes into play
14) 13 above applies to inherited govt plans after 2021; if rolled to inherited IRA the IRA custodian will have to know the "effective date" of the Secure Act for the QRP plan originally inherited.
This is why IRA custodians do not attempt to accurately determine beneficiary RMDs. They cannot acquire all these facts, and if they could they could not process all of them. The beneficiaries themselves rarely think of these variables. Therefore, the IRS does not require IRA Custodians to provide inherited RMD amounts, only to notify that an RMD is required.
Here are just some of the situations that cause the inherited IRA RMD to differ from the simple LE divisor (Table I age of beneficiary divisor in year after the year of death reduced by 1.0 for each subsequent year.
1) Inherited IRA assigned out of estate by executor, owner passed prior to RBD - 5 year rule applies
2) Same, except owner passed after RBD - remaining LE of owner applies
3) Multiple individual beneficiaries and separate accounts not created by the deadline - oldest beneficiary age applies
4) IRA included a charitable beneficiary that was not paid off by the beneficiary determination date - 5 year rule or owner LE applies
5) NQ trust inherited IRA and trustee assigned IRA out of the trust - 5 year rule or owner LE applies
6) Qualified trust and trustee assigned IRA out of trust - oldest trust beneficiary age applies
7) Inherited QRP with 5 year rule default and owner passed prior to RBD, direct rollover to inherited IRA after deadline - 5 year rule applies
8) Inherited QRP with LE default, death reported late and age of oldest beneficiary applies.
9) Beneficiary is successor beneficiary of already inherited plan from non spouse -RMD schedule of original beneficiary applies.
10) Beneficiary is successor beneficiary of plan originally inherited from spouse - need to determine if surviving spouse defaulted to ownership status by failing to take full beneficiary RMD - current beneficiary is then a designated beneficiary, not a successor.
11) IRAs inherited from same original decedent can aggregate the inherited IRA RMD.
12) Inherited IRAs combined in error with other inherited IRAs would require the higher of the RMDs.
13) IRA inherited after 2019 - Secure Act 10 year rule comes into play; determining which beneficiaries are "eligible" comes into play
14) 13 above applies to inherited govt plans after 2021; if rolled to inherited IRA the IRA custodian will have to know the "effective date" of the Secure Act for the QRP plan originally inherited.
This is why IRA custodians do not attempt to accurately determine beneficiary RMDs. They cannot acquire all these facts, and if they could they could not process all of them. The beneficiaries themselves rarely think of these variables. Therefore, the IRS does not require IRA Custodians to provide inherited RMD amounts, only to notify that an RMD is required.
- tuningfork
- Posts: 884
- Joined: Wed Oct 30, 2013 8:30 pm
Re: Inherited RMD Reminders
I had to call Vanguard the first year to get my Inherited IRA RMD setup. Since the account did not exist on December 31 of the previous year, Vanguard's software couldn't figure out the RMD amount without help from a human. Once I called, they calculated the first year's RMD for me (based on the account's opening balance, which the software should have known). I could then go online to schedule the first year's RMD. In subsequent years, Vanguard sends a notice in January with the RMD amount and a reminder for me to update the payout schedule if desired.
I don't recall, but I may have gotten a notice about RMD requirements when Vanguard created the account. That was a number of years ago.
I don't recall, but I may have gotten a notice about RMD requirements when Vanguard created the account. That was a number of years ago.
- asset_chaos
- Posts: 2628
- Joined: Tue Feb 27, 2007 5:13 pm
- Location: Melbourne
Re: Inherited RMD Reminders
If you don't activate the RMD service, why would they assume anything other than that you've decided to take care of things yourself. They should, however, tell you about the auto RMD service when you open an IRA. I think I recall being told about the automated RMD service when I first moved an inherited IRA to Vanguard. I didn't set it up immediately because I could take advantage of the rule permitting the RMD to start the year after the year of death of the IRA owner. But I activated the auto RMD service subsequently because it's one less thing to remember to do.
Regards, |
|
Guy
Re: Inherited RMD Reminders
My spouse and siblings got their inherited IRAs set up at VG in mid December and funded on 12/30. When we looked at the online RMD there was a warning that VG needed to be called since their had been multiple beneficiaries. Turned out to be nothing when the rep came up with the same number I had. Spouse told them to do calc and just notify my spouse early each year.
Re: Inherited RMD Reminders
We receive those reminders too, since 2012, even though we have automated the process (including withholding). Note: this is an Inherited tIRA.MissMolly wrote: ↑Sat Jan 11, 2020 12:47 pm I received an annual notification from Vanguard in January of each year regarding my required RMD on my inherited IRA and the amount I need to withdraw. I have been receiving these since my mother passed in 2013. I was only 60 at the time, so it was not tied to me being 70.5 years old.
Re: Inherited RMD Reminders
Me three (since 2010). Vanguard notifies me of the RMD amount for my Inherited IRA each January, and reminds me later in the year if I've not yet taken the RMD. My RMD is not automated, as I use it each December to pay my annual tax withholding; some years I have a good guesstimate and other years I hit safe harbor.retire57 wrote: ↑Sat Jan 11, 2020 4:59 pmWe receive those reminders too, since 2012, even though we have automated the process (including withholding). Note: this is an Inherited tIRA.MissMolly wrote: ↑Sat Jan 11, 2020 12:47 pm I received an annual notification from Vanguard in January of each year regarding my required RMD on my inherited IRA and the amount I need to withdraw. I have been receiving these since my mother passed in 2013. I was only 60 at the time, so it was not tied to me being 70.5 years old.
Also, whenever I log in, I can see the RMD dollar amount and also how it was computed (birthday, factor, 12/31 balance, etc) and RMD history. My Account => Retirement contributions, distributions & RMDs => RMD tab. OP: Can you see your RMD details in your account?
- UpsetRaptor
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Re: Inherited RMD Reminders
Not just Vanguard, I had to help out a relative who had an Inherited IRA with Fidelity for 15 years before they notified her that she should be taking RMDs.
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Re: Inherited RMD Reminders
The IRA's were not originally at Vanguard, since they were transferred to them it was up to you to set up your RMD.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
Re: Inherited RMD Reminders
Vanguard has always handled our RMD issues responsibly. And if you set it up with them correctly at the outset, it’s not a matter of Vanguard “reminding” you to take an RMD; Vanguard will automatically do it for you, calculate the correct amount for you, and deposit the sum in the after-tax fund you denominate, or mail you a check, or whatever you prefer.
I’m not in the (shrinking) “Vanguard can do no wrong” camp, but as to RMD’s our experience is that Vanguard is doing its job
I’m not in the (shrinking) “Vanguard can do no wrong” camp, but as to RMD’s our experience is that Vanguard is doing its job
Re: Inherited RMD Reminders
FWIW I've had an inherited IRA at Schwab for almost 20 years and have never received an RMD distribution calculation or reminder.
I like money so remembering to do this on my own has never been a problem for me.
I like money so remembering to do this on my own has never been a problem for me.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
Re: Inherited RMD Reminders
My spouse has an inherited IRA at Vanguard. Vanguard sends her RMD reminders several times a year whether she has already withdrawn the RMD or not. It is rather annoying in fact to get a reminder months after one has already taken the RMD. Vanguard knows that money in the amount more than the RMD was already withdrawn, yet they still send reminders.
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Re: Inherited RMD Reminders
Re: Inherited RMD Reminders
Schwab and some other custodians are failing to meet any requirement. The IRS does not even require Box 11 of the Form 5498 (RMD required box) to be checked. It can't hurt to send a reminder, however an attempt to calculate the correct inherited IRA RMD can go badly wrong if all the pertinent info is not considered.
Further, just like an owned IRA, the RMD can be taken from other IRA accounts unknown to the custodian. For an inherited IRA RMD, aggregation is only possible for other inherited IRAs inherited from the same original decedent.
And it certainly will not get any easier under the Secure Act RMD provisions. Eligible beneficiaries will have annual RMDs and 10 year beneficiaries will not.