Vanguard RMD Service

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sarahjane
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Vanguard RMD Service

Post by sarahjane »

This month a RMD distribution was made from my account even though my RMD Service election is "Compute Only" and I have not scheduled any distributions. A similar error occurred in December 2014 which would have caused my RMD to have been exceeded if it hadn't been successfully reversed through my rep. Has anyone else had this experience? I advise monitoring your RMD distributions to ensure they are in accord with your elected schedule.
Alan S.
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Re: Vanguard RMD Service

Post by Alan S. »

If you did not make any error in setting this up, this type of thing will rightfully make people reluctant to use these services. Your warning is entirely justified.

Taxpayers need to watch their statements carefully, since if the error is entirely that of the custodian, it could be reversed by the custodian. Rollover of amounts in excess of the RMD is possible within 60 days, if you still have your one permitted rollover available under the new restricted rules for rollovers. If you don't, you could use the escape hatch of converting the excess amount and then recharacterizing it back to the TIRA.

However, distributions that fall within your RMD amount cannot be rolled back because they are RMDs. This is primarily a timing issue because you have to take the RMD at some point during the year, so you might be getting it at at time that you did not want it. Perhaps you wanted to withhold from the RMD and the unexpected distribution eliminated that option. You might have wanted to wait to see the status of QCDs and the unexpected distribution nuked that chance.

I would only use these services if you think the chance of a custodian error is less than the chance of you making your own error. And if you have questions whether you set up your request correctly or not, disable the request until you are sure.

Remember that your RMDs can be aggregated if you have more than one IRA account.
ubermax
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Re: Vanguard RMD Service

Post by ubermax »

Another alternative if you want more control is to do your own calculations and then set up automatic withdrawals - of course if you just want one withdrawal per year then it's real easy .
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CABob
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Re: Vanguard RMD Service

Post by CABob »

Another alternative if you want more control is to do your own calculations and then set up automatic withdrawals - of course if you just want one withdrawal per year then it's real easy .
Maybe or maybe not. I had all of my RMD taken in early November last year. Vanguard did the calculation and I set up the date and from where the distribution was to be taken. Then about two weeks later another "RMD" was taken from a couple of funds. A quick call to Vanguard and a day of research got it straightened out and reversed. I did not ever learn how and why the second distribution was made.
The lesson learned was to watch your account transactions.
Bob
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Mel Lindauer
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Re: Vanguard RMD Service

Post by Mel Lindauer »

I've never had a problem with Vanguard re: RMDs. They calculate the figures for both me and my wife and provide the numbers on our online accounts and send a letter with the numbers. Then, I direct them when to actually take the distributions.
Best Regards - Mel | | Semper Fi
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joe8d
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Re: Vanguard RMD Service

Post by joe8d »

Mel Lindauer wrote:I've never had a problem with Vanguard re: RMDs. They calculate the figures for both me and my wife and provide the numbers on our online accounts and send a letter with the numbers. Then, I direct them when to actually take the distributions.
Same here.
All the Best, | Joe
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plannerman
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Re: Vanguard RMD Service

Post by plannerman »

Vanguard actually made an error in calculating DW's RMD last year, so you can't take anything for granted.

Steve
ubermax
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Re: Vanguard RMD Service

Post by ubermax »

My only point was that there is an alternative to the Vanguard service ; the calculation is straight forward and with automatic withdrawal you can pick the amounts ,buckets and date - in addition you can change those parameters monthly .

But nothing is fool proof , you still need to check the transactions .
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sarahjane
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Re: Vanguard RMD Service

Post by sarahjane »

OP here. Without my scheduling any 2015 withdrawals a distribution was made in the exact amount of the final 2014 withdrawal. Rep acknowledges the error but still trying to find the cause. There's a software glitch somewhere, so be watchful.
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CABob
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Re: Vanguard RMD Service

Post by CABob »

plannerman wrote:Vanguard actually made an error in calculating DW's RMD last year, so you can't take anything for granted.
Interesting since the calculation is quite simple. Was there some thing about your situation that made it prone to an error?
Bob
Alan S.
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Re: Vanguard RMD Service

Post by Alan S. »

I view this as similar to any other financial transaction.

If you are sure what you are doing, why use an intermediary? It is another step the process goes through and another potential for error as a result of any number of communication or technical issues.

But just like hiring a tax pro, there are many people who benefit from the greater expertise. For RMDs, the same holds true.

An RMD is not a special distribution that is flagged as such when you take it. It is any distribution you take in an RMD year and is reported just like a distribution you took before RMDs began. If you know the amount you need to take, decide which IRA and investments you want to take it from and if you want withholding or not. Then just order that distribution directed to where you want it.
furwut
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Re: Vanguard RMD Service

Post by furwut »

Alan S. wrote:
But just like hiring a tax pro, there are many people who benefit from the greater expertise. For RMDs, the same holds true.
Yeah that's me. I use the Vanguard service and totally rely on it being correct as I don't check the math.
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Allocationist
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Re: Vanguard RMD Service

Post by Allocationist »

A slightly off topic comment… Late last year Vanguard distributed funds from my wife’s rollover IRA without her request or permission. Prior to this distribution, my wife, who is not of “RMD age”, had never taken a distribution from her IRA.

As her agent, I contacted Vanguard within a few days of the distribution. The Vanguard rep was uncertain why the distribution was made but told me it would be promptly reversed. I told her I appreciated her prompt action in reversing the error and advised my biggest concern was that no distribution be reported to the IRS and my state tax authorities. She assured me that no tax distribution documents would be issued.

A few weeks later we received a cheery e-mail from Vanguard notifying my wife that her 2014 distribution tax documents were now available. I contacted the same Vanguard rep who was apologetic and assured me the tax reporting documents would be reversed. I am frustrated by the situation and hope the Vanguard errors do not cause complications with my Federal and State returns.
Alan S.
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Re: Vanguard RMD Service

Post by Alan S. »

I think you are indicating that your wife received a 1099R reporting this distribution. That needs to be rescinded because it will force you to report a rollover on your 1040 to offset the taxable income. But rollovers are now severely restricted, and this would either exhaust the one she has for another 12 months, or worse could be the second rollover in the last 12 months from this IRA, and that is not allowed.

VG needs to rescind the 1099R.
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plannerman
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Re: Vanguard RMD Service

Post by plannerman »

CABob wrote:
plannerman wrote:Vanguard actually made an error in calculating DW's RMD last year, so you can't take anything for granted.
Interesting since the calculation is quite simple. Was there some thing about your situation that made it prone to an error?
You are right, this is a simple calculation, and I was astonished that it was wrong. DW's IRA portfolio is very similar to my own--Vanguard's calculation of my RMD was right, her's was wrong. While Vanguard confirmed their number was wrong, I was unsuccessful in prying out of them why it was wrong.

plannerman
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