"When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

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gkaplan
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"When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by gkaplan » Thu Aug 10, 2017 8:41 pm

Where you go for required minimum distributions will usually have a bigger impact than when you go. . . .

http://news.morningstar.com/articlenet/ ... ?id=821071
Gordon

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by mhalley » Thu Aug 10, 2017 9:52 pm

She doesn't mention one advantage of waiting till year end, eliminate the need for estimated taxes by paying your tax bill via the rmd.

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by WoodSpinner » Thu Aug 10, 2017 10:55 pm

Another minor nit ...

For IRAs, you can take an RMD from 1 account that represents the requirement of all your IRAs.

As I I understand it, this is not so for multiple 401K accounts, you have to take RMDs from each account separately. Plus ROTH 401ks also require RMDs.

Thoughts. 8-)

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by sport » Thu Aug 10, 2017 11:37 pm

She doesn't mention the effect of QCDs. If you want to make QCDs throughout the year, and have them count towards your RMD, you cannot take the balance of the RMD until after all your QCDs have been made. I have made some QCDs this year, and plan to make more. Accordingly, I have not yet taken all of my RMD.

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by Swansea » Fri Aug 11, 2017 5:25 am

This is a good article. However I feel the 12% rate of return, to show amount differences is high.

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by beardsworth » Fri Aug 11, 2017 7:53 am

WoodSpinner wrote:For IRAs, you can take an RMD from 1 account that represents the requirement of all your IRAs.

As I I understand it, this is not so for multiple 401K accounts, you have to take RMDs from each account separately. Plus ROTH 401ks also require RMDs.
Yes. For reasons I've never understood, probably related to long-ago actions by Congress, the year's RMD must be separately calculated for each 401(k) and 457(b), and must then actually be taken separately from each such account according to its own RMD obligation, but in the case of IRA and 403(b) the RMD amount owed by each must be calculated but then the total amount of money itself can be taken from any one of them, or several of them, as long as it's sufficient to meet the combined obligation of all accounts of the same type.

https://www.irs.gov/retirement-plans/re ... ibutions#5

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by heartwood » Fri Aug 11, 2017 8:49 am

gkaplan wrote:
Where you go for required minimum distributions will usually have a bigger impact than when you go. . . .

http://news.morningstar.com/articlenet/ ... ?id=821071
Thanks.

My own strategy, at least this year, is a result of how we fund our lifestyle, some though SS and pension, but most from investments. This year I took my RMD early, February? I did that rather than sell taxable investments and have to pay tax on gains and then still pay tax on the RMD later in the year. By my analysis that would substantially increase my total tax bill for the year. I was also mindful of taking the IRA gains off the table in case of a market dip.

If the market had been down instead of up I might have waited until year's end.

Still a good analysis by Ms. Benz.

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by House Blend » Fri Aug 11, 2017 8:50 am

The Author wrote:But how about the timing of RMDs in a given year? Are you better off taking your distribution at the beginning of the year, or at the end? Or should you take them throughout the year, the better to fund living expenses and cover quarterly estimated taxes?
Sigh. This is massively unimportant.

Aside from operational constraints like getting the dollar amount right, meeting the deadline, and doing conversions *after* meeting the RMD, there is no wrong way. Take RMDs whenever it is convenient.

And yet, people are filled with all sorts of angst about when to do it and which funds to select. It is similar to the "never sell" paralysis that many seem to have that leads to spending only dividends.

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by Leesbro63 » Fri Aug 11, 2017 8:52 am

House Blend wrote: And yet, people are filled with all sorts of angst about when to do it and which funds to select. It is similar to the "never sell" paralysis that many seem to have that leads to spending only dividends.
Actually I think it's more like "what brokerage do you use?". It's (mostly) irrelevant which container you use. The stuff inside is the real issue and should be the first question.

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by 2015 » Fri Aug 11, 2017 10:45 am

House Blend wrote:
The Author wrote:But how about the timing of RMDs in a given year? Are you better off taking your distribution at the beginning of the year, or at the end? Or should you take them throughout the year, the better to fund living expenses and cover quarterly estimated taxes?
Sigh. This is massively unimportant.

Aside from operational constraints like getting the dollar amount right, meeting the deadline, and doing conversions *after* meeting the RMD, there is no wrong way. Take RMDs whenever it is convenient.

And yet, people are filled with all sorts of angst about when to do it and which funds to select. It is similar to the "never sell" paralysis that many seem to have that leads to spending only dividends.
+1
There will never be an end to reasons to produce click bait.

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by CABob » Fri Aug 11, 2017 12:49 pm

mhalley wrote:She doesn't mention one advantage of waiting till year end, eliminate the need for estimated taxes by paying your tax bill via the rmd.
However, one could take partial withdrawals earlier in the year and pay taxes with one later in the year.
Bob

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by Watty » Fri Aug 11, 2017 3:42 pm

You could write a chapter in a book on deciding when to take an RMD so I would not have expected a short article to cover everything.

One option to also consider is to set it up to have your IRA custodian to automatically do the RMD each year. One of my goals in retirement planning is to make things as easy as possible so that I am less likely to make mistakes when I am older and may be less capable or if my wife who knows less about investing has to manage it some day.

I will likely set it up to be done in February so that I will remember to check to make sure that it was actually done when I am preparing my taxes for the prior year . If I want to take it later in the year for some reason then I can change the automatic withdrawal before it happens.

I know that there are ways to appeal the penalty but if you plan on doing the RMD in December but are in the hospital, or just forget, then you could be in a bind if the RMD is not done. If you planned to do it early in the year and it slips a few months then you still have plenty of time to take the RMD.

One other thing to consider is that if you take an unneeded RMD early in the year and invest it the;

1) If the investment drops 10% then you can harvest the capital loss and get a tax break.

2) If the investment gains 10% then you can just leave it there until it goes to your estate someday at a stepped up cost basis and the capital gains tax would never need to be paid.

There are no doubt there are valid reasons for people to take the RMD at different times but as another poster, and the article, said it usually doesn't make a big difference.

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by Ron » Fri Aug 11, 2017 3:49 pm

And then there are those of us that just intend to take the RMD and spend it, regardless of the time of year :mrgreen: ...

- Ron

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by invst65 » Fri Aug 11, 2017 4:06 pm

If I'm understanding this right (and I'm probably not since I'm an idiot and someone can correct me - wouldn't be the first time), your RMD is fixed at the end of the year based on the value of your portfolio and the distribution tables. So if the value of your IRA will continue to grow through the year and you don't need the money, it could be advantageous to leave the money in your IRA as long as you can without tax consequences in favor of rolling it over into a more conservative account where it won't continue to grow.

If that's the point, I get it.

What I don't get is how she knows whether or not that money in your IRA will continue to grow in value more than wherever else you are going to put it.

Did she offer us her crystal ball to predict that?

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by celia » Fri Aug 11, 2017 4:29 pm

sport wrote:She doesn't mention the effect of QCDs. If you want to make QCDs throughout the year, and have them count towards your RMD, you cannot take the balance of the RMD until after all your QCDs have been made. I have made some QCDs this year, and plan to make more. Accordingly, I have not yet taken all of my RMD.
Let's clarify this. I believe if your RMD is $12,000 and you want to withdraw $1,000 a month, you can take the first 6 months as RMDs and the last 6 as QCDs, can't you? Or can't you alternate months: RMD, QCD, RMD, QCD, ...?

You can also take QCDs after your RMD has been satisfied. By definition, "RMDs taken" are just the first dollars withdrawn each year until the RMD-calculated-value has been met. RMDs can be met by QCDs, but QCDs can be done any time during the year (after you are 70.5).

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by Almost there » Fri Aug 11, 2017 4:52 pm

Celia, the way I learned from other Bogleheads is that the QCD has to be taken before any RMD withdrawal.

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by indexonlyplease » Fri Aug 11, 2017 4:55 pm

what does QCD stand for??

Also, when retired and in the same tax bracket will it matter if you start rolling over money into the Roth IRA from your taxed deferrd account?? Or can you just let the money grow tax free until RMD required at 70.5??

What if SS put you in higher tax bracket. I have a pension that could cause this to happen but I wont know untill I get close.

All this assuming you will stay in the same tax bracket.

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by kaneohe » Fri Aug 11, 2017 5:28 pm

Almost there wrote:Celia, the way I learned from other Bogleheads is that the QCD has to be taken before any RMD withdrawal.
That is not true...........you can take them in any order. However if you want to withdraw the least from the IRA, then you will make the
QCD and the rest of the withdrawals = the RMD. EX: Your RMD is 10K.......take 4K of QCD and 6K of other withdrawals and you have satisfied
the RMD and not taken any more. If you forget and take your RMD of 10K, you can still take the 4K of QCD, but then you will have withdrawn
more than the RMD.

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by Almost there » Fri Aug 11, 2017 5:29 pm


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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by Almost there » Fri Aug 11, 2017 5:38 pm

Almost there wrote:
Celia, the way I learned from other Bogleheads is that the QCD has to be taken before any RMD withdrawal. quote]

Kaneohe wrote:
That is not true...........you can take them in any order. However if you want to withdraw the least from the IRA, then you will make the
QCD and the rest of the withdrawals = the RMD. EX: Your RMD is 10K.......take 4K of QCD and 6K of other withdrawals and you have satisfied
the RMD and not taken any more. If you forget and take your RMD of 10K, you can still take the 4K of QCD, but then you will have withdrawn
more than the RMD.
I guess this is just the year you turn 70.5. You have to do the QCD before taking the RMD.

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by kaneohe » Fri Aug 11, 2017 8:02 pm

Almost there wrote:
Almost there wrote:
Celia, the way I learned from other Bogleheads is that the QCD has to be taken before any RMD withdrawal. quote]

Kaneohe wrote:
That is not true...........you can take them in any order. However if you want to withdraw the least from the IRA, then you will make the
QCD and the rest of the withdrawals = the RMD. EX: Your RMD is 10K.......take 4K of QCD and 6K of other withdrawals and you have satisfied
the RMD and not taken any more. If you forget and take your RMD of 10K, you can still take the 4K of QCD, but then you will have withdrawn
more than the RMD.
I guess this is just the year you turn 70.5. You have to do the QCD before taking the RMD.
Any documentation on that? which bogleheads did you learn that from?

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by sport » Fri Aug 11, 2017 9:26 pm

QCD means Qualified Charitable Distribution. The rules are in IRS Pub 590-B. You must have passed the age of 70.5 to make them. The rule for RMDs is that the first distributions count towards your RMD, whether or not they are QCDs. If you make QCDs after you have completed your RMD, they are allowable. However, those QCDs will not reduce your tax liability for that year. You can take your first year RMD any time during the year you reach 70.5 (actually until April 1 of the following year). However, for QCDs, you must actually have reached the age of 70.5.

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Qualified Charitable Distributions

Post by celia » Fri Aug 11, 2017 10:09 pm

sport wrote:QCD means Qualified Charitable Distribution. The rules are in IRS Pub 590-B. You must have passed the age of 70.5 to make them. The rule for RMDs is that the first distributions count towards your RMD, whether or not they are QCDs. If you make QCDs after you have completed your RMD, they are allowable. However, those QCDs will not reduce your tax liability for that year. You can take your first year RMD any time during the year you reach 70.5 (actually until April 1 of the following year). However, for QCDs, you must actually have reached the age of 70.5.
The underlined part [if you put it together to make a sentence] ends up being not true, according to the IRS. In fact, they HAVE to reduce your tax liability to be considered QCDs:
https://www.irs.gov/pub/irs-pdf/p590b.pdf
Pub 590-B, p 13 wrote:Qualified charitable distributions. A qualified charitable distribution (QCD) is generally a nontaxable distribution made directly by the trustee of your IRA (other than a SEP or SIMPLE IRA) to an organization eligible to receive tax deductible contributions. You must be at least age 70 1/2 when the distribution was made. Also, you must have the same type of acknowledgment of your contribution that you would need to claim a deduction for a charitable contribution. See Records To Keep in Pub. 526.

The maximum annual exclusion for QCDs is $100,000. Any QCD in excess of the $100,000 exclusion limit is included in income as any other distribution. If you file a joint return, your spouse can also have a QCD and exclude up to $100,000. The amount of the QCD is limited to the amount of the distribution that would otherwise be included in income. If your IRA includes nondeductible contributions, the distribution is first considered to be paid out of otherwise taxable income.
This text is then followed by an example showing an IRA containing nondeductible contributions. They are considered to be the last dollars withdrawn. These dollars [nondeductible contributions] do not reduce the amount of tax owed, so they can be donated but are not part of the QCD, just a regular withdrawal. But the example also shows the taxpayer qualifying for a QCD that is more than his/her RMD. [His RMD at age 75 would be closer to 4% of the account value and 66% of the IRA is taxable. Although he donated 83% of his IRA, the QCD is limited to 66%.] Maybe this is what you are thinking of, Sport.

I wasn't aware you need to get (and keep) an acknowledgement from the organization. I guess this means it can't be anonymous, unless you can arrange that somehow. And each spouse can donate up to $100K. Good things to know!

Maybe this is why Christine Benz didn't mention QCDs. It is a topic on its own. :D

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by harmony » Fri Aug 11, 2017 11:47 pm

CABob wrote:
mhalley wrote:She doesn't mention one advantage of waiting till year end, eliminate the need for estimated taxes by paying your tax bill via the rmd.
However, one could take partial withdrawals earlier in the year and pay taxes with one later in the year.
Another variation of this would be to take a mid-year single RMD, a couple of months after your tax return has cleared (and any “more-tax-due” requests are paid). This timing would allow a final tweaking of the withheld amount to ensure that both federal and state withholdings match safe-harbor requirements. It could happen at an equidistant neutral point between Jan. 1 and Dec. 31.

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Re: Qualified Charitable Distributions

Post by sport » Sat Aug 12, 2017 12:27 am

celia wrote:
sport wrote:QCD means Qualified Charitable Distribution. The rules are in IRS Pub 590-B. You must have passed the age of 70.5 to make them. The rule for RMDs is that the first distributions count towards your RMD, whether or not they are QCDs. If you make QCDs after you have completed your RMD, they are allowable. However, those QCDs will not reduce your tax liability for that year. You can take your first year RMD any time during the year you reach 70.5 (actually until April 1 of the following year). However, for QCDs, you must actually have reached the age of 70.5.
The underlined part [if you put it together to make a sentence] ends up being not true, according to the IRS. In fact, they HAVE to reduce your tax liability to be considered QCDs:
https://www.irs.gov/pub/irs-pdf/p590b.pdf
Pub 590-B, p 13 wrote:Qualified charitable distributions. A qualified charitable distribution (QCD) is generally a nontaxable distribution made directly by the trustee of your IRA (other than a SEP or SIMPLE IRA) to an organization eligible to receive tax deductible contributions. You must be at least age 70 1/2 when the distribution was made. Also, you must have the same type of acknowledgment of your contribution that you would need to claim a deduction for a charitable contribution. See Records To Keep in Pub. 526.

The maximum annual exclusion for QCDs is $100,000. Any QCD in excess of the $100,000 exclusion limit is included in income as any other distribution. If you file a joint return, your spouse can also have a QCD and exclude up to $100,000. The amount of the QCD is limited to the amount of the distribution that would otherwise be included in income. If your IRA includes nondeductible contributions, the distribution is first considered to be paid out of otherwise taxable income.
This text is then followed by an example showing an IRA containing nondeductible contributions. They are considered to be the last dollars withdrawn. These dollars [nondeductible contributions] do not reduce the amount of tax owed, so they can be donated but are not part of the QCD, just a regular withdrawal. But the example also shows the taxpayer qualifying for a QCD that is more than his/her RMD. [His RMD at age 75 would be closer to 4% of the account value and 66% of the IRA is taxable. Although he donated 83% of his IRA, the QCD is limited to 66%.] Maybe this is what you are thinking of, Sport.

I wasn't aware you need to get (and keep) an acknowledgement from the organization. I guess this means it can't be anonymous, unless you can arrange that somehow. And each spouse can donate up to $100K. Good things to know!

Maybe this is why Christine Benz didn't mention QCDs. It is a topic on its own. :D
celia,
The subject of making QCDs from an IRA that has both pretax and after tax content is an entirely separate subject. I did not address any of that. Here is how I understand QCDs from an account that is all pretax:

Let's say you are over 70.5 and have an RMD of 10K. The first 10K withdrawn from the account will be your RMD. That could be 5K in QCDs and 5K in cash or any combination. The QCDs are not taxable, even though they are part or all of your RMD. You can do these in any order. You could withdraw 1K in cash, make a 2K QCD, withdraw 3K in cash, make a 3K QCD and take 1K in cash. In this case, you have made 5K in QCDs and you took 5K in cash. You have completed your RMD and 5K of it is taxable. Now, if you make any additional QCDs, they are non-taxable withdrawals. They will not impact your current year taxes. However, they will reduce the size of the IRA so future RMDs will be smaller. The main result of these rules is this: If you want your QCDs to count towards your RMD, you must make them before you complete the RMD or as the completion of the RMD. As you note, there is a 100K limit on QCDs for the year, but this is a separate consideration from whether or not they apply to your RMD.

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Re: Qualified Charitable Distributions

Post by celia » Sat Aug 12, 2017 2:06 am

We agree that QCDs can be taken from your RMD and they can be taken after your RMD has been satisfied. We agree that if they are part of your RMD, they are not taxable, but I'm not sure if we agree that if they are taken after your RMD has been satisfied, they are still not taxable (or are). I think we may be interpreting this sentence differently:
sport wrote:If you make QCDs after you have completed your RMD, they....will not reduce your tax liability for that year.
If "tax liability for that year" means the taxes you would have paid on all your other income and the RMDs that were taxable, then you are right. The tax liability will not decrease, it will remain the same. (At least it won't increase.)

But if "tax liability for that year" means the taxes you would have paid if you took the same distributions as the QCDs but didn't give them to charity, then I am right that your tax liability will be reduced if the distribution is a QCD instead.

I guess this means it depends on what your "baseline" view is. And I guess we all know QCDs are tax-free whether they are part of the RMD or not (unless you are removing non-deductible contributions). That is what is important here.

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by CWRadio » Sat Aug 12, 2017 4:24 pm

I am trying to decide if it is financially better to do RMD on a monthly distribution from Vanguard LifeStrategy Cnsrv Gr Inv (VSCGX) or the 4 fund equivalent (Total U.S. stock market index fund, Total international stock index fund, Total U.S. bond index fund and Total international bond index fund)? Or maybe is does not matter. Thanks Paul

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by jdb » Sat Aug 12, 2017 4:47 pm

I like Christine Benz and appreciate her Morningstar columns. Think that this is a good article, not complicated. She does avoid QCD issues which are important. I will wait until end of year when my RMD are due, after QCD. Thanks Christine.

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by celia » Mon Aug 14, 2017 12:03 pm

jdb wrote:
Sat Aug 12, 2017 4:47 pm
I like Christine Benz and appreciate her Morningstar columns. Think that this is a good article, not complicated. She does avoid QCD issues which are important. I will wait until end of year when my RMD are due, after QCD. Thanks Christine.
The underlined is not clear to me. If you mean you will take a QCD, then an RMD, you need to be aware that the QCD, if taken first, is also satisfying the RMD (or part of it).

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by jdb » Mon Aug 14, 2017 1:44 pm

celia wrote:
Mon Aug 14, 2017 12:03 pm
jdb wrote:
Sat Aug 12, 2017 4:47 pm
I like Christine Benz and appreciate her Morningstar columns. Think that this is a good article, not complicated. She does avoid QCD issues which are important. I will wait until end of year when my RMD are due, after QCD. Thanks Christine.
The underlined is not clear to me. If you mean you will take a QCD, then an RMD, you need to be aware that the QCD, if taken first, is also satisfying the RMD (or part of it).
Yes, that is why plan to wait until finish with QCD that year before taking whatever remains of annual RMD. I am looking forward to taking advantage of the QCD.

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by Almost there » Tue Aug 15, 2017 5:35 pm

kaneohe wrote:
Almost there wrote:
Celia, the way I learned from other Bogleheads is that the QCD has to be taken before any RMD withdrawal. quote]

Kaneohe wrote:
That is not true...........you can take them in any order. However if you want to withdraw the least from the IRA, then you will make the
QCD and the rest of the withdrawals = the RMD. EX: Your RMD is 10K.......take 4K of QCD and 6K of other withdrawals and you have satisfied
the RMD and not taken any more. If you forget and take your RMD of 10K, you can still take the 4K of QCD, but then you will have withdrawn
more than the RMD.
I guess this is just the year you turn 70.5. You have to do the QCD before taking the RMD.

Any documentation on that? which bogleheads did you learn that from?

Yes I found it above in this post. However, in the meantime, sport, retracted this statement.
Post by sport » Thu Aug 10, 2017 11:37 pm
She doesn't mention the effect of QCDs. If you want to make QCDs throughout the year, and have them count towards your RMD, you cannot take the balance of the RMD until after all your QCDs have been made. I have made some QCDs this year, and plan to make more. Accordingly, I have not yet taken all of my RMD.
I will be 70 in April 2018.

So here is my example: my RMD for 2018 will be $14,000.
I can start my RMDs in January 2018 by withdrawing $10,000. Then in October after I turned 70.5, I can do my QCD for $4,000.
Is that correct?

In addition, do I indicate to Vanguard at the time of the $10,000 withdrawal, to withhold federal income tax too?

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Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by kaneohe » Tue Aug 15, 2017 6:05 pm

Almost there wrote:
Tue Aug 15, 2017 5:35 pm
.......................................

I will be 70 in April 2018.

So here is my example: my RMD for 2018 will be $14,000.
I can start my RMDs in January 2018 by withdrawing $10,000. Then in October after I turned 70.5, I can do my QCD for $4,000.
Is that correct?

In addition, do I indicate to Vanguard at the time of the $10,000 withdrawal, to withhold federal income tax too?
The withdrawals seem fine. You could w/h tax on your 10K Jan withdrawal. However be aware that most do the w/h in a later
in yr withdrawal. They are penny-pinching so they squeeze the last penny of earnings out of their funds. Basically you are paying
taxes earlier that you have too. Alternatively you could pay the w/h with estimated taxes quarterly throughout the year so you aren't
paying so much too early.

Almost there
Posts: 684
Joined: Thu Jan 03, 2008 7:06 pm
Location: Arizona USA

Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by Almost there » Tue Aug 15, 2017 6:27 pm

Kaneohe wrote:
The withdrawals seem fine. You could w/h tax on your 10K Jan withdrawal. However be aware that most do the w/h in a later
in yr withdrawal. They are penny-pinching so they squeeze the last penny of earnings out of their funds. Basically you are paying
taxes earlier that you have too. Alternatively you could pay the w/h with estimated taxes quarterly throughout the year so you aren't
paying so much too early.
Thank you for your input. This was just an example. I will be taking RMDS from January - April. My spousal benefits for Social Security will end in April and in May will be receiving Social Security on my own record. Actually it'll be enough to live on for every day expenses.

I will do my test in H&R Block software beginning next year to determine the amount of QCD will benefit me the most. I am sure I will be back with additional questions.

sport
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Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by sport » Tue Aug 15, 2017 6:28 pm

Almost there wrote:
Tue Aug 15, 2017 5:35 pm
However, in the meantime, sport, retracted this statement.

Post by sport » Thu Aug 10, 2017 11:37 pm
She doesn't mention the effect of QCDs. If you want to make QCDs throughout the year, and have them count towards your RMD, you cannot take the balance of the RMD until after all your QCDs have been made. I have made some QCDs this year, and plan to make more. Accordingly, I have not yet taken all of my RMD.

I will be 70 in April 2018.

So here is my example: my RMD for 2018 will be $14,000.
I can start my RMDs in January 2018 by withdrawing $10,000. Then in October after I turned 70.5, I can do my QCD for $4,000.
Is that correct?

In addition, do I indicate to Vanguard at the time of the $10,000 withdrawal, to withhold federal income tax too?
I do not believe I retracted that statement. This is how I understand the rules:
When you have an RMD, the first money withdrawn counts towards your RMD. Some of that money can be in the form of QCDs if your are older than 70.5. If some of your RMD is in the form of QCDs, the QCD amount is not taxable. The balance of the RMD is taxable. If you make QCDs after completing the RMD, they are not taxable, but they do not reduce the taxability of the RMD already completed.

This is how I would handle your example. Let's say your RMD is 14K, you want to withhold 2K for taxes, and make a 4K QCD. You could withdraw 8K in January, make the 4K QCD in October (make sure you are past the 70.5 mark) and then make a 2K withdrawal in early December and have 100% of that withdrawal withheld for taxes. I would not wait until late December because you do not want to have anything get fouled up in the busy season at the end of the year. This also gives you the opportunity to verify your last transaction took place while there is still time to correct any errors.

Almost there
Posts: 684
Joined: Thu Jan 03, 2008 7:06 pm
Location: Arizona USA

Re: "When's the Right Time to Take RMDs?" – (Christine Benz's Latest Column)

Post by Almost there » Tue Aug 15, 2017 7:19 pm

Sorry I must have misunderstood your post.

sport wrote:
This is how I would handle your example. Let's say your RMD is 14K, you want to withhold 2K for taxes, and make a 4K QCD. You could withdraw 8K in January, make the 4K QCD in October (make sure you are past the 70.5 mark) and then make a 2K withdrawal in early December and have 100% of that withdrawal withheld for taxes. I would not wait until late December because you do not want to have anything get fouled up in the busy season at the end of the year. This also gives you the opportunity to verify your last transaction took place while there is still time to correct any errors.
Oh I like your idea. Yes, December is rather late especially with everyone else calling. So perhaps right after Thanksgiving will be preferable.

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