RMD Question

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SittingOnTheFence
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RMD Question

Post by SittingOnTheFence » Wed Oct 04, 2017 12:00 am

Later half of next year I will start to take RMD's @ 70.5.

I currently supplement my financial needs by tapping my TIRA.
Assuming I continue to tap my TIRA after the beginning of the year, but before I turn 70.5, will those withdrawals be considered toward satisfying my RMD, or will only withdrawals made after the actual 70.5 date be used for satisfying the rules. To use a number example, say my RMD is $15000. Say I will turn 70.5 on Sep 30. If I withdraw $5000 from my TIRA between Jan - Sep, can that be applied to RMD so that I will only need to withdraw an additional $10k to satisfy RMD requirement, or....am I required to withdraw the entire $15k after Sep 30?

I know I can delay until following year but that will make the tax situation even worse.

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celia
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Re: RMD Question

Post by celia » Wed Oct 04, 2017 12:11 am

The first RMDs can be withdrawn anytime during THE YEAR you turn 70.5. You don't have to be 70.5 at the time. In fact, even if you withdrew for regular living expenses early in the year, the RMD is always defined as the first dollars withdrawn each year until you reach the RMD amount.

And, you can always withdraw extra, if you like (and pay taxes on it, of course).

In your example, you could even withdraw $15K on January 1 and be done with the RMD for the year.

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Flobes
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Re: RMD Question

Post by Flobes » Wed Oct 04, 2017 11:39 am

Adding to Celia's current information:

However, you must wait until you are 70.5 if you plan to make QCDs (Qualified Charitable Distributions) for any of your RMD obligation.

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midareff
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Re: RMD Question

Post by midareff » Wed Oct 04, 2017 11:53 am

Flobes wrote:
Wed Oct 04, 2017 11:39 am
Adding to Celia's current information:

However, you must wait until you are 70.5 if you plan to make QCDs (Qualified Charitable Distributions) for any of your RMD obligation.
That's an interesting fact I did not know. Can you explain to me why a QCD from an IRA in RMD would be a better way to do charitable than regular from taxable if firmly in a tax bracket such as 25% or 28%.

pshonore
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Re: RMD Question

Post by pshonore » Wed Oct 04, 2017 12:06 pm

midareff wrote:
Wed Oct 04, 2017 11:53 am
Flobes wrote:
Wed Oct 04, 2017 11:39 am
Adding to Celia's current information:

However, you must wait until you are 70.5 if you plan to make QCDs (Qualified Charitable Distributions) for any of your RMD obligation.
That's an interesting fact I did not know. Can you explain to me why a QCD from an IRA in RMD would be a better way to do charitable than regular from taxable if firmly in a tax bracket such as 25% or 28%.
QCDs reduce AGI, (perhaps avoiding increased Medicare premiums, etc) itemized deductions do not. Also if your state does not allow charitable contributions (state tax based on AGI like CT), you're better off with a QCD. And of course if you don't itemize, its a no brainer

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midareff
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Re: RMD Question

Post by midareff » Wed Oct 04, 2017 1:12 pm

pshonore wrote:
Wed Oct 04, 2017 12:06 pm
midareff wrote:
Wed Oct 04, 2017 11:53 am
Flobes wrote:
Wed Oct 04, 2017 11:39 am
Adding to Celia's current information:

However, you must wait until you are 70.5 if you plan to make QCDs (Qualified Charitable Distributions) for any of your RMD obligation.
That's an interesting fact I did not know. Can you explain to me why a QCD from an IRA in RMD would be a better way to do charitable than regular from taxable if firmly in a tax bracket such as 25% or 28%.
QCDs reduce AGI, (perhaps avoiding increased Medicare premiums, etc) itemized deductions do not. Also if your state does not allow charitable contributions (state tax based on AGI like CT), you're better off with a QCD. And of course if you don't itemize, its a no brainer
Thanks for the explanation. I'm looking forward to getting my AGI > $170K.

The Wizard
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Re: RMD Question

Post by The Wizard » Wed Oct 04, 2017 1:30 pm

midareff wrote:
Wed Oct 04, 2017 1:12 pm
Thanks for the explanation. I'm looking forward to getting my AGI > $170K.
I think you mean getting AGI UNDER $170K...
Attempted new signature...

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celia
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Re: RMD Question

Post by celia » Wed Oct 04, 2017 1:36 pm

The Wizard wrote:
Wed Oct 04, 2017 1:30 pm
midareff wrote:
Wed Oct 04, 2017 1:12 pm
Thanks for the explanation. I'm looking forward to getting my AGI > $170K.
I think you mean getting AGI UNDER $170K...
I think he/she means OVER $170K, as in "I hope I have a LOT of income in retirement". :beer

btenny
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Re: RMD Question

Post by btenny » Wed Oct 04, 2017 2:23 pm

Your need to check the IRS website for more details on IRA withdrawals before you are 70.5. I am pretty sure you CANNOT take out any rmd money in the year you are 70.5 before that date and count it as rmd... So if you withdraw $10k before you are 70.5 it is taxable but does not count toward your rmd....

Good luck

JW-Retired
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Re: RMD Question

Post by JW-Retired » Wed Oct 04, 2017 2:33 pm

btenny wrote:
Wed Oct 04, 2017 2:23 pm
Your need to check the IRS website for more details on IRA withdrawals before you are 70.5. I am pretty sure you CANNOT take out any rmd money in the year you are 70.5 before that date and count it as rmd... So if you withdraw $10k before you are 70.5 it is taxable but does not count toward your rmd....
That isn't correct. In the year you are 70.5 you can take your RMD in any part of the year. I took mine in the first few days of January and was 70.5 in June.
JW
Retired at Last

sport
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Re: RMD Question

Post by sport » Wed Oct 04, 2017 3:40 pm

JW-Retired wrote:
Wed Oct 04, 2017 2:33 pm
btenny wrote:
Wed Oct 04, 2017 2:23 pm
Your need to check the IRS website for more details on IRA withdrawals before you are 70.5. I am pretty sure you CANNOT take out any rmd money in the year you are 70.5 before that date and count it as rmd... So if you withdraw $10k before you are 70.5 it is taxable but does not count toward your rmd....
That isn't correct. In the year you are 70.5 you can take your RMD in any part of the year. I took mine in the first few days of January and was 70.5 in June.
JW
JW is correct. For official details, see IRS Pub 590-B.

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midareff
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Re: RMD Question

Post by midareff » Wed Oct 04, 2017 4:25 pm

celia wrote:
Wed Oct 04, 2017 1:36 pm
The Wizard wrote:
Wed Oct 04, 2017 1:30 pm
midareff wrote:
Wed Oct 04, 2017 1:12 pm
Thanks for the explanation. I'm looking forward to getting my AGI > $170K.
I think you mean getting AGI UNDER $170K...
I think he/she means OVER $170K, as in "I hope I have a LOT of income in retirement". :beer
YOU got it Celia. :sharebeer There are certain upsides to being required to pay lots of tax.

The Wizard
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Re: RMD Question

Post by The Wizard » Wed Oct 04, 2017 5:03 pm

midareff wrote:
Wed Oct 04, 2017 4:25 pm

YOU got it Celia. :sharebeer There are certain upsides to being required to pay lots of tax.
OK, I can't disagree with that, since I've had higher AGI and tax in retirement than when working also.
But as regards Medicare tier thresholds, most of us know you don't want to be Just Above a threshold, such as the $170k mentioned.
Better to be at $200k rather than $171k...
Attempted new signature...

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midareff
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Re: RMD Question

Post by midareff » Wed Oct 04, 2017 5:50 pm

The Wizard wrote:
Wed Oct 04, 2017 5:03 pm
midareff wrote:
Wed Oct 04, 2017 4:25 pm

YOU got it Celia. :sharebeer There are certain upsides to being required to pay lots of tax.
OK, I can't disagree with that, since I've had higher AGI and tax in retirement than when working also.
But as regards Medicare tier thresholds, most of us know you don't want to be Just Above a threshold, such as the $170k mentioned.
Better to be at $200k rather than $171k...
Do I hear $230k?... going once.....

btenny
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Re: RMD Question

Post by btenny » Wed Oct 04, 2017 6:36 pm

OK JW you have told me I am wrong but I did NOT find the answer in IRS pub 590. I looked before I posted and I just read it again in depth. I have read all the data in IRS Pub 590 and cannot find this detail. Everything I see says wait until you are 70.5 to take any distributions to make them count as RMDs. Every example they show say make your first distribution after you are 70.5. They never say it is OK to take it earlier in the year that I could find. Soooo I thought that was the rule.

Please advise the page number or some example they show. Thanks in advance.

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friar1610
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Re: RMD Question

Post by friar1610 » Wed Oct 04, 2017 6:40 pm

I did my first QCD contribution this year after many years of transferring appreciated MF shares to the charity. At least in my case it was close to a wash on which was better for me. But I was concerned with keeping the AGI under $170K so that was the tiebreaker.

BTW, I don't have a link but Kitces has an excellent piece on the pros and cons of each on his web site.
Friar1610

sport
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Re: RMD Question

Post by sport » Wed Oct 04, 2017 7:59 pm

btenny wrote:
Wed Oct 04, 2017 6:36 pm
OK JW you have told me I am wrong but I did NOT find the answer in IRS pub 590. I looked before I posted and I just read it again in depth. I have read all the data in IRS Pub 590 and cannot find this detail. Everything I see says wait until you are 70.5 to take any distributions to make them count as RMDs. Every example they show say make your first distribution after you are 70.5. They never say it is OK to take it earlier in the year that I could find. Soooo I thought that was the rule.

Please advise the page number or some example they show. Thanks in advance.
This is from page 6 of IRS Pub 590-B
"Distributions by the required beginning date. You
must receive at least a minimum amount for each year
starting with the year you reach age 70 1/2 (your 70 1/2 year)."

Note that it says starting with the year you reach 70.5, not starting when you reach 70.5

JW-Retired
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Re: RMD Question

Post by JW-Retired » Wed Oct 04, 2017 8:17 pm

btenny wrote:
Wed Oct 04, 2017 6:36 pm
OK JW you have told me I am wrong but I did NOT find the answer in IRS pub 590. I looked before I posted and I just read it again in depth. I have read all the data in IRS Pub 590 and cannot find this detail. Everything I see says wait until you are 70.5 to take any distributions to make them count as RMDs. Every example they show say make your first distribution after you are 70.5. They never say it is OK to take it earlier in the year that I could find. Soooo I thought that was the rule.

Please advise the page number or some example they show. Thanks in advance.
How about this....
http://www.kiplinger.com/article/retire ... ution.html
or this
http://www.morningstar.com/advisor/t/10 ... ra-rmd.htm
Sorry, I can't find an official IRS link or page that says this exactly..... but it worked for me when I did it. Vanguard allowed it in early January.
JW
ps added later......This quote from an IRS work sheet strongly implies any time in the year:
Deadline for receiving required minimum distribution:
-- Year you turn age 70 ½ - by April 1 of the following year
-- All subsequent years - by December 31 of that year
https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf
Last edited by JW-Retired on Thu Oct 05, 2017 7:56 am, edited 1 time in total.
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kaneohe
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Re: RMD Question

Post by kaneohe » Wed Oct 04, 2017 9:16 pm

and another https://www.irahelp.com/forum-post/2477 ... -age-70-12

The Alan there is the same Alan S. here:

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grabiner
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Re: RMD Question

Post by grabiner » Wed Oct 04, 2017 9:25 pm

pshonore wrote:
Wed Oct 04, 2017 12:06 pm
midareff wrote:
Wed Oct 04, 2017 11:53 am
Flobes wrote:
Wed Oct 04, 2017 11:39 am
Adding to Celia's current information:

However, you must wait until you are 70.5 if you plan to make QCDs (Qualified Charitable Distributions) for any of your RMD obligation.
That's an interesting fact I did not know. Can you explain to me why a QCD from an IRA in RMD would be a better way to do charitable than regular from taxable if firmly in a tax bracket such as 25% or 28%.
QCDs reduce AGI, (perhaps avoiding increased Medicare premiums, etc) itemized deductions do not. Also if your state does not allow charitable contributions (state tax based on AGI like CT), you're better off with a QCD. And of course if you don't itemize, its a no brainer
And another advantage is that the QCD doesn't count as income for making SS taxable. In the 28% bracket, that won't matter, but if you are low enough in the 25% bracket that you are in the SS taxation phase-in, a $10000 QCD could save you $4625 in federal tax.
David Grabiner

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SpringMan
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Re: RMD Question

Post by SpringMan » Thu Oct 05, 2017 8:06 am

Like pointed out by JW and others, RMDs can be taken any time in the calendar year in which you turn 70.5. Think about the person that turns 70.5 on December 31, it would not be practical for them to have to wait until age 70.5 on Dec. 31.
Best Wishes, SpringMan

btenny
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Re: RMD Question

Post by btenny » Thu Oct 05, 2017 11:28 am

Thanks all. I guess I can start taking my RMD on Jan 1 2018 instead of later in the year.

The Wizard
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Re: RMD Question

Post by The Wizard » Thu Oct 05, 2017 11:35 am

btenny wrote:
Thu Oct 05, 2017 11:28 am
Thanks all. I guess I can start taking my RMD on Jan 1 2018 instead of later in the year.
Right.
On the other side of the coin, some folks my try to do Roth conversions in the first part of that year prior to turning 70-1/2.
That's not permissible by IRS regulation and puts one in an Excess Contribution situation...
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oldcomputerguy
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Re: RMD Question

Post by oldcomputerguy » Thu Oct 05, 2017 12:04 pm

The Wizard wrote:
Thu Oct 05, 2017 11:35 am
btenny wrote:
Thu Oct 05, 2017 11:28 am
Thanks all. I guess I can start taking my RMD on Jan 1 2018 instead of later in the year.
Right.
On the other side of the coin, some folks my try to do Roth conversions in the first part of that year prior to turning 70-1/2.
That's not permissible by IRS regulation and puts one in an Excess Contribution situation...
How can doing a Roth Conversion put one in an excess contribution situation? I understood Roth conversions did not count against contribution limits.
Anybody know why there's a 20-pound frozen turkey up in the light grid?

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Flobes
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Re: RMD Question

Post by Flobes » Thu Oct 05, 2017 12:24 pm

Sequence of IRA decisions / actions when subject to RMDs:

First: Consider QCDs. You must have already reached 70.5.

Second: Fulfill RMD obligation.

Third: Do Roth conversions.

If you do Second before First, QCD will not be qualified part of RMD.

If you do Third before Second, it will be an excess contribution.

This is because first money out of the IRA is deemed to be RMD, and RMDs cannot be rolled over or converted.

Edited for clarity; kudos Epsilon Delta.
Last edited by Flobes on Thu Oct 05, 2017 12:43 pm, edited 1 time in total.

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Epsilon Delta
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Re: RMD Question

Post by Epsilon Delta » Thu Oct 05, 2017 12:35 pm

Flobes wrote:
Thu Oct 05, 2017 12:24 pm
Sequence of IRA decisions / actions when subject to RMDs:

First: Consider QCDs. You must have already reached 70.5.

Second: Fulfill RMD obligation.

If you do Second before First, QCD will not be qualified.
Not so. It will still be qualified, and you will still have fulfilled the RMD. You will have withdrawn more from the IRA than you were required to (which is generally a bad thing) but you will be in full compliance with the IRS code.

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Re: RMD Question

Post by neilpilot » Thu Oct 05, 2017 2:03 pm

oldcomputerguy wrote:
Thu Oct 05, 2017 12:04 pm
The Wizard wrote:
Thu Oct 05, 2017 11:35 am
btenny wrote:
Thu Oct 05, 2017 11:28 am
Thanks all. I guess I can start taking my RMD on Jan 1 2018 instead of later in the year.
Right.
On the other side of the coin, some folks my try to do Roth conversions in the first part of that year prior to turning 70-1/2.
That's not permissible by IRS regulation and puts one in an Excess Contribution situation...
How can doing a Roth Conversion put one in an excess contribution situation? I understood Roth conversions did not count against contribution limits.
Because in the year you turn 70 1/2, the IRS REQUIRES you to take your RMD before any Roth conversion. And if you delay your first year's RMD and double up in the year after you turned 70 1/2, then no Roth conversion is permitted.

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oldcomputerguy
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Re: RMD Question

Post by oldcomputerguy » Thu Oct 05, 2017 3:06 pm

neilpilot wrote:
Thu Oct 05, 2017 2:03 pm
oldcomputerguy wrote:
Thu Oct 05, 2017 12:04 pm
The Wizard wrote:
Thu Oct 05, 2017 11:35 am
btenny wrote:
Thu Oct 05, 2017 11:28 am
Thanks all. I guess I can start taking my RMD on Jan 1 2018 instead of later in the year.
Right.
On the other side of the coin, some folks my try to do Roth conversions in the first part of that year prior to turning 70-1/2.
That's not permissible by IRS regulation and puts one in an Excess Contribution situation...
How can doing a Roth Conversion put one in an excess contribution situation? I understood Roth conversions did not count against contribution limits.
Because in the year you turn 70 1/2, the IRS REQUIRES you to take your RMD before any Roth conversion. And if you delay your first year's RMD and double up in the year after you turned 70 1/2, then no Roth conversion is permitted.
I take that to mean that if you delay your first RMD to the following April, you cannot do a Roth conversion in the year you turn 70-1/2 (prior to taking the first RMD).

Not trying to be argumentative, just trying to understand. So am I correct in thinking that it's okay under the rules to take one's RMD, then take a further draw on one's tIRA to convert only that second draw to Roth? (I know one is not allowed to count a Roth converted amount as part of an RMD.)
Anybody know why there's a 20-pound frozen turkey up in the light grid?

neilpilot
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Re: RMD Question

Post by neilpilot » Thu Oct 05, 2017 3:45 pm

oldcomputerguy wrote:
Thu Oct 05, 2017 3:06 pm
neilpilot wrote:
Thu Oct 05, 2017 2:03 pm
oldcomputerguy wrote:
Thu Oct 05, 2017 12:04 pm
The Wizard wrote:
Thu Oct 05, 2017 11:35 am
btenny wrote:
Thu Oct 05, 2017 11:28 am
Thanks all. I guess I can start taking my RMD on Jan 1 2018 instead of later in the year.
Right.
On the other side of the coin, some folks my try to do Roth conversions in the first part of that year prior to turning 70-1/2.
That's not permissible by IRS regulation and puts one in an Excess Contribution situation...
How can doing a Roth Conversion put one in an excess contribution situation? I understood Roth conversions did not count against contribution limits.
Because in the year you turn 70 1/2, the IRS REQUIRES you to take your RMD before any Roth conversion. And if you delay your first year's RMD and double up in the year after you turned 70 1/2, then no Roth conversion is permitted.
I take that to mean that if you delay your first RMD to the following April, you cannot do a Roth conversion in the year you turn 70-1/2 (prior to taking the first RMD).

Not trying to be argumentative, just trying to understand. So am I correct in thinking that it's okay under the rules to take one's RMD, then take a further draw on one's tIRA to convert only that second draw to Roth? (I know one is not allowed to count a Roth converted amount as part of an RMD.)
Yes, that's how I understand the IRS guidance.

sport
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Re: RMD Question

Post by sport » Thu Oct 05, 2017 4:49 pm

The easy way to think about it is that the first withdrawals from an TIRA must satisfy any RMD requirement. After that, you can do anything you want. You can convert and you can withdraw. You cannot convert the RMD.

SittingOnTheFence
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Re: RMD Question

Post by SittingOnTheFence » Sat Oct 07, 2017 1:54 am

sport wrote:
Wed Oct 04, 2017 7:59 pm
This is from page 6 of IRS Pub 590-B
"Distributions by the required beginning date. You
must receive at least a minimum amount for each year
starting with the year you reach age 70 1/2 (your 70 1/2 year)."

Note that it says starting with the year you reach 70.5, not starting when you reach 70.5
OP here. This thread shows why I was confused. Thanks for clearing it up, now I can start planning for my big year, coming up soon.

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