First RMD

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Almost there
Posts: 832
Joined: Thu Jan 03, 2008 7:06 pm
Location: Arizona USA

First RMD

Post by Almost there » Mon Dec 03, 2018 6:23 pm

Finally it came time to take my first RMD from my funds at Vanguard. I have two IRA accounts, but chose to have all the RMD taken out of only one account. As I was doing all the steps online along with a VG advisor on the phone to guide me, he informed me that I could not forward part of the funds to my checking account. It was either all of the funds transferred to a cash account OR my checking account, which truly caught me off guard. So I chose to have all the RMD transferred to my cash account.


So here is my question: Obviously I will be paying taxes on the RMD withdrawal. If I now choose to take from the cash account money to transfer to my checking account, will I be paying additional taxes on that withdrawal? (In hindsight (and I am always very good at hindsight :oops: ), I should have transferred the whole RMD to my checking account, and then upon receipt, transfer part of it to the cash account at VG. Is that what other Bogleheads do?


Almost there

bloom2708
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Location: Fargo, ND

Re: First RMD

Post by bloom2708 » Mon Dec 03, 2018 6:26 pm

Your cash account is just the settlement account. Money transferred in or out lands there.

You may get 1-2 days interest while it sits. No real tax implication.

Once the sell transaction settles and the money is in the cash/settlement account, then transfer part/all to checking.

You just have to wait while the transaction clears/is processed.

Edit: My assumption is the RMD was sent to the settlement account in your taxable account. Alan S. makes a good point. The RMD dollars have to leave your IRA (specific mutual fund or settlement account) to trigger the actual withdrawal. You can move it to taxable, transfer to checking or a mix.
Last edited by bloom2708 on Tue Dec 04, 2018 1:25 pm, edited 1 time in total.
"We are not here to please, but to provoke thoughtfulness." --Unknown Boglehead

Alan S.
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Re: First RMD

Post by Alan S. » Mon Dec 03, 2018 8:32 pm

You do not incur any taxes until an actual distribution from the IRA takes place, ie funds transferred out of the IRA.

If the "cash account" is the settlement fund in your IRA, your RMD has not yet been distributed. You will have to make sure that it is, probably to your checking account. That is what will trigger the 1099R reporting your IRA distribution which applies against your total RMD requirement for all your non Roth IRA accounts at Vanguard or any other custodian.

Your IRA distribution is only taxed one time, so so not worry about double taxation. But do make sure that the funds are distributed out of the IRA. Note that if you reached 70.5 this year, then all or part of your 2018 RMD can be deferred to as late as 4/1/2019.

Almost there
Posts: 832
Joined: Thu Jan 03, 2008 7:06 pm
Location: Arizona USA

Re: First RMD

Post by Almost there » Wed Dec 05, 2018 7:52 pm

Bloom2708 wrote:
Edit: My assumption is the RMD was sent to the settlement account in your taxable account. Alan S. makes a good point. The RMD dollars have to leave your IRA (specific mutual fund or settlement account) to trigger the actual withdrawal. You can move it to taxable, transfer to checking or a mix.Edit: My assumption is the RMD was sent to the settlement account in your taxable account. Alan S. makes a good point. The RMD dollars have to leave your IRA (specific mutual fund or settlement account) to trigger the actual withdrawal. You can move it to taxable, transfer to checking or a mix.
Bloom2708 that is incorrect. The RMD dollars can only transfer to one account. I had planned to have part of the funds sent to my brokerage account (which I call cash account) and the other part to my checking account. In hindsight, I should have sent all the funds to my checking account and then transfer some of it to my brokerage account. I had to make a split decision and now feel it was incorrect. In addition, there was no way for me to foresee that the market would drop 800 points. So the checking account would have been definitely a better choice, but then I have always been great in hindsight.

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