Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
I'd be interested in how others have handled QCDs or other withdrawals when Vanguard's Automatic RMD Service has already been set up.
The Vanguard RMD Service Agreement states the following:
"Any distribution you take prior to enrolling in the Service will reduce the RMD amount to be distributed through the Service in that year. After you enroll in the Service, distributions you take outside of the Service will not reduce the remaining RMD amount to be paid under the Service, except in certain instances when the Service is updated. This may result in you taking more than the minimum required amount."
It looks like any manual IRA withdrawals will not change amounts scheduled to be withdrawn by the Automatic RMD Service.
Is there a way to update the existing service to incorporate withdrawals already taken or is it necessary to cancel the service and enroll again?
Thanks for any information.
The Vanguard RMD Service Agreement states the following:
"Any distribution you take prior to enrolling in the Service will reduce the RMD amount to be distributed through the Service in that year. After you enroll in the Service, distributions you take outside of the Service will not reduce the remaining RMD amount to be paid under the Service, except in certain instances when the Service is updated. This may result in you taking more than the minimum required amount."
It looks like any manual IRA withdrawals will not change amounts scheduled to be withdrawn by the Automatic RMD Service.
Is there a way to update the existing service to incorporate withdrawals already taken or is it necessary to cancel the service and enroll again?
Thanks for any information.
Enjoying the Outdoors
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
I just use the RMD service to calculate the amount of my RMDs. I make QCDs throughout the year, so those are manual withdrawals. Late in the year, I make another manual withdrawal to complete my RMD. You do not need to use the automatic service unless you wish to. For me, it is simpler not to.
-
- Posts: 1212
- Joined: Wed Nov 07, 2007 5:51 pm
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
+1 Manual redemptions are easily done using the website and allow you to time them to fit your needs.sport wrote: ↑Mon Feb 17, 2020 1:02 pm I just use the RMD service to calculate the amount of my RMDs. I make QCDs throughout the year, so those are manual withdrawals. Late in the year, I make another manual withdrawal to complete my RMD. You do not need to use the automatic service unless you wish to. For me, it is simpler not to.
DMW
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
I agree.
If you understand what you are doing, you are better off avoiding RMD service programs. In those cases it is adding another link to the chain that could become a weaker link than you would be on your own. Anyone doing QCDs should avoid these services because of the QCD timing requirements. Keep in mind that if you use a service when you know what you are doing adds the task of fully understanding the limitations and assumptions programmed into the service. You already understand RMDs, but now you also have to understand how the service does things.
Then, you must decide whether you plan to "set it and forget it", closely monitor the distributions during the year, or something in between.
Of course, there are many who should use an RMD service, because they have a much higher chance of making errors than the service does.
If you understand what you are doing, you are better off avoiding RMD service programs. In those cases it is adding another link to the chain that could become a weaker link than you would be on your own. Anyone doing QCDs should avoid these services because of the QCD timing requirements. Keep in mind that if you use a service when you know what you are doing adds the task of fully understanding the limitations and assumptions programmed into the service. You already understand RMDs, but now you also have to understand how the service does things.
Then, you must decide whether you plan to "set it and forget it", closely monitor the distributions during the year, or something in between.
Of course, there are many who should use an RMD service, because they have a much higher chance of making errors than the service does.
-
- Posts: 18461
- Joined: Tue Dec 31, 2013 6:05 am
- Location: 26 miles, 385 yards west of Copley Square
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Here's what I would be asking anyone providing automatic RMD withdrawal services:
Who pays the penalty when you screw things up?
With manual withdrawals, you can watch what's going on, rather than not knowing what's going on until it's too late. Personally, I'm not overly happy to accept a 50% penalty.
Who pays the penalty when you screw things up?
With manual withdrawals, you can watch what's going on, rather than not knowing what's going on until it's too late. Personally, I'm not overly happy to accept a 50% penalty.
Bogle: Smart Beta is stupid
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Exactly how I do it. The RMD service is also helpful because, as you make the various QCD withdrawals it updates the balance of yoursport wrote: ↑Mon Feb 17, 2020 1:02 pm I just use the RMD service to calculate the amount of my RMDs. I make QCDs throughout the year, so those are manual withdrawals. Late in the year, I make another manual withdrawal to complete my RMD. You do not need to use the automatic service unless you wish to. For me, it is simpler not to.
RMD remaining. I don't want any portion of it sent to me automatically.
Gill
Cost basis is redundant. One has a basis in an investment |
One advises and gives advice |
One should follow the principle of investing one's principal
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Thanks all for the help. Many excellent suggestions.
Alan - I assume QCD Timing Requirements means taking QCDs before fully satisfying the RMD if the intent is to not exceed the calculated RMD. I also had the impression that there can be problems if QCDs are processed late in the year and checks are either lost or not cashed.
Alan - I assume QCD Timing Requirements means taking QCDs before fully satisfying the RMD if the intent is to not exceed the calculated RMD. I also had the impression that there can be problems if QCDs are processed late in the year and checks are either lost or not cashed.
Enjoying the Outdoors
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Can you give a quick example of how you do this?
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Yes, exactly. And those timing issues are aggravated if a person has multiple TIRAs that trigger the RMD aggregation rules, while RMD services likely treat the IRA under the service as the ONLY IRA. Any distribution from the non service account is applied to the total RMD remaining as of the distribution date, and that could cause a QCD from the RMD service account to be distributed after the total RMD had been completed.Electron wrote: ↑Mon Feb 17, 2020 2:24 pm Thanks all for the help. Many excellent suggestions.
Alan - I assume QCD Timing Requirements means taking QCDs before fully satisfying the RMD if the intent is to not exceed the calculated RMD. I also had the impression that there can be problems if QCDs are processed late in the year and checks are either lost or not cashed.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
From the Accounts menu, select "Retirement contributions, distributions & RMDs". Then pick RMD. There will be a set of questions to set up a TIRA RMD determination. For my spouse who had an inherited IRA, there was an instruction to call Vanguard. Once you answer have told it to determine the RMD automatically, it supposedly will notify each year. There was to be an additional selection and set of instructions if you wanted it to be taken out automatically. I was pleased that the number calculated was the same one I had come up with to the penny.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
On the Vanguard Website, under IRA distributions, there is a place to select the "RMD service". Under this option, there is a choice of "calculate only". So, each year, Vanguard sends me a letter advising me of my RMD amount (which I verify). On the web site, there is a continuously adjusted number telling me how much more I need to take out for the year.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
I am trying to simplify my taxes. Thanks to learning about the three-fund strategy a Bogleheads, I did not sell anything in taxation last year. My taxes are so easy this year. It is the same with QCDs. Once I figured out how they worked I decided to take larger QCDs to three organization at the beginning of the year. I called Vanguard and Fidelity to do this. They sent me the checks and I forwarded them to the organizations with a request to send me a letter acknowledging the amount. A few weeks later, I called up both Vanguard and Fidelity to take the RMDs and withhold some tax. I am done for the year with QCDs and RMDs.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Occasionally, at odd times during the year, a friend or relative passes away and the family asks for donations to the deceased's favorite charity. Similarly, they may ask for donations to the heart association, or cancer society, etc. if that was the cause of death. Therefore, I don't want to "use up" all my QCD opportunity too early in the year. Since I want to make these donations anyway, I may as well get a tax break while doing so. When it gets to be around the end of November, I withdraw the remainder of the RMD.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
I like to restrict the number of charities to whom I donate as I don't want to get on their mailing list. Last year I seemed to get two or three appeals per month from one charity. So this year I called up the charity and politely told them that I made one annual contribution at the beginning of the year and would they please remove me from their mailing list. So far this seems to be working and I have had no further appeals.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
If only that worked. The charities sell your name and address to other charities. I made a gift to one new charity last year and since then I have been inundated with mail from a number of charities that I have had no previous contact with. Of course, then those charities will sell your info to yet additional charities. It never ends.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Yes. I estimate my RMD and then wait for the final figure from Vanguard. I execute QCDs in the first half of the year. In the 4th quarter I take the rest and request withholding to cover taxes based on what I paid for the previous year (Safe Harbor).sport wrote: ↑Mon Feb 17, 2020 1:02 pm I just use the RMD service to calculate the amount of my RMDs. I make QCDs throughout the year, so those are manual withdrawals. Late in the year, I make another manual withdrawal to complete my RMD. You do not need to use the automatic service unless you wish to. For me, it is simpler not to.
I have created a workbook in Excel to keep track of how much of RMD is going where. (I'm using Excel more to picture the info than to calculate.) I have already put my data in for 2020 and can see that approx 1/3 will go to each QCDs, Fed/State taxes, and Spend/Invest. I have already moved the RMD $$$ into the IRA MM fund so that I don't have to keep thinking about where I will take the RMD from. Don't have to do any more calculations for the rest of the year.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
You don't have to estimate the RMD, you can calculate it exactly yourself. You use your December 31 account balance and the divisor from the appropriate table in IRS Pub 509B. I do this to verify that Vanguard has calculated it correctly. I have never found them to be wrong, but I check to be sure.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
I differed by one cent with Vanguard’s calculation this year. Never happened before and I couldn’t determine why but just went with the higher amount.sport wrote: ↑Mon Feb 17, 2020 7:37 pmYou don't have to estimate the RMD, you can calculate it exactly yourself. You use your December 31 account balance and the divisor from the appropriate table in IRS Pub 509B. I do this to verify that Vanguard has calculated it correctly. I have never found them to be wrong, but I check to be sure.
Gill
Cost basis is redundant. One has a basis in an investment |
One advises and gives advice |
One should follow the principle of investing one's principal
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Actually, I've found that you need to wait a few days after the start of the year because the value of the IRA on Dec 31 may undergo some minor adjustments. Waiting for the "official" number assures that the number is final.sport wrote: ↑Mon Feb 17, 2020 7:37 pmYou don't have to estimate the RMD, you can calculate it exactly yourself. You use your December 31 account balance and the divisor from the appropriate table in IRS Pub 509B. I do this to verify that Vanguard has calculated it correctly. I have never found them to be wrong, but I check to be sure.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
This thread is now in the Personal Finance (Not Investing) forum (withdrawal strategy).
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Timely thread. I plan to do a QCD out of my Vanguard tIRA account (using my money market fund). It appears that there is only one way to do this: manual check to the charity sent to me and then I send the check to the organization. This would be true if I were to make multiple donations to this organization in the same year (i.e. another check for each withdrawal). Correct?
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
I don't think I've seen anything about setting up a recurring QCD, so yes, request a check each time. It's a very smooth process. And pretty quick.Prudence wrote: ↑Mon Feb 17, 2020 9:14 pm Timely thread. I plan to do a QCD out of my Vanguard tIRA account (using my money market fund). It appears that there is only one way to do this: manual check to the charity sent to me and then I send the check to the organization. This would be true if I were to make multiple donations to this organization in the same year (i.e. another check for each withdrawal). Correct?
When the check arrives, I do what someone on this forum once suggested: I scan the check so I have a copy. I actually clip it to the cover letter I send to the charity and scan them together and keep that for my records.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Very timely thread. I thank everyone who has been and will be sharing their "how-to" info!
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
The way you describe is correct. However, there is an alternative. You can get check writing privileges on the IRA money market fund. You can then write your own checks. Since the money is coming out of the IRA directly, it meets the requirement for QCDs.Prudence wrote: ↑Mon Feb 17, 2020 9:14 pm Timely thread. I plan to do a QCD out of my Vanguard tIRA account (using my money market fund). It appears that there is only one way to do this: manual check to the charity sent to me and then I send the check to the organization. This would be true if I were to make multiple donations to this organization in the same year (i.e. another check for each withdrawal). Correct?
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Sport: what a simple idea! Have you actually done this with QCDs?
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
If you write the checks from the IRA, then QCD is not taken until charity deposits check and bank is paid by Vanguard.sport wrote: ↑Mon Feb 17, 2020 9:28 pmThe way you describe is correct. However, there is an alternative. You can get check writing privileges on the IRA money market fund. You can then write your own checks. Since the money is coming out of the IRA directly, it meets the requirement for QCDs.Prudence wrote: ↑Mon Feb 17, 2020 9:14 pm Timely thread. I plan to do a QCD out of my Vanguard tIRA account (using my money market fund). It appears that there is only one way to do this: manual check to the charity sent to me and then I send the check to the organization. This would be true if I were to make multiple donations to this organization in the same year (i.e. another check for each withdrawal). Correct?
QCD is taken out of your IRA by Vanguard when they send your a check made out to the charity of your choice.
The layer is best for those who do their QCDs/RMDs in December.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Also, if I do the QCD withdrawal using a Vanguard withdrawal transaction, it would be accounted for and reported by Vanguard at year-end as a non-taxable QCD. Whereas if I write a personal check from my money market fund, it would not, right? (all of the funds in my tIRA are taxable BTW)Eagle33 wrote: ↑Tue Feb 18, 2020 2:15 amIf you write the checks from the IRA, then QCD is not taken until charity deposits check and bank is paid by Vanguard.sport wrote: ↑Mon Feb 17, 2020 9:28 pmThe way you describe is correct. However, there is an alternative. You can get check writing privileges on the IRA money market fund. You can then write your own checks. Since the money is coming out of the IRA directly, it meets the requirement for QCDs.Prudence wrote: ↑Mon Feb 17, 2020 9:14 pm Timely thread. I plan to do a QCD out of my Vanguard tIRA account (using my money market fund). It appears that there is only one way to do this: manual check to the charity sent to me and then I send the check to the organization. This would be true if I were to make multiple donations to this organization in the same year (i.e. another check for each withdrawal). Correct?
QCD is taken out of your IRA by Vanguard when they send your a check made out to the charity of your choice.
The layer is best for those who do their QCDs/RMDs in December.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
I don't have VG IRA so no experience there. When my broker issues the QCD checks, the 1099R only reflects the QCD as withdrawals and they look taxable just like any other personal withdrawal. It is my understanding that this is normal and the QCD designation is something you are responsible for doing at tax time. Possibly the reason it is done this way is that the broker does not want to be responsible for blessing this as a legitimate QCD.....e.g. you may give to an charity that is not approved and broker does not want the responsibility for investigating.Prudence wrote: ↑Tue Feb 18, 2020 8:13 am ............................................................................
Also, if I do the QCD withdrawal using a Vanguard withdrawal transaction, it would be accounted for and reported by Vanguard at year-end as a non-taxable QCD. Whereas if I write a personal check from my money market fund, it would not, right? (all of the funds in my tIRA are taxable BTW)
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Yes, I have made about a dozen QCDs this way. If you have a Vanguard mutual fund account, the checks are marked "not valid for less than $250.00". Vanguard tells me they do not enforce that, but I would not want to use such a check for less than that amount. I was also told that if you have a brokerage account, the checks do not have that marking. I don't know why they are different.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
kaneohe is correct. Vanguard does not know if you are making a valid QCD in either case. All QCD withdrawals are categorized as "ordinary taxable withdrawals" on the 1099R. The QCD reduction is done on your 1040 tax form. Therefore, the only official documentation you have for a QCD is the letter of acknowledgement you get from the charity. So, you should keep track of those letters and if you do not get one, contact the charity and ask for it. If you should get audited by the IRS, you would need that. I also keep copies of the checks as a backup.kaneohe wrote: ↑Tue Feb 18, 2020 8:21 amI don't have VG IRA so no experience there. When my broker issues the QCD checks, the 1099R only reflects the QCD as withdrawals and they look taxable just like any other personal withdrawal. It is my understanding that this is normal and the QCD designation is something you are responsible for doing at tax time. Possibly the reason it is done this way is that the broker does not want to be responsible for blessing this as a legitimate QCD.....e.g. you may give to an charity that is not approved and broker does not want the responsibility for investigating.Prudence wrote: ↑Tue Feb 18, 2020 8:13 am ............................................................................
Also, if I do the QCD withdrawal using a Vanguard withdrawal transaction, it would be accounted for and reported by Vanguard at year-end as a non-taxable QCD. Whereas if I write a personal check from my money market fund, it would not, right? (all of the funds in my tIRA are taxable BTW)
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Vanguard sends out a formal confirmation and RMD Service Agreement after the Automatic RMD is set up. It would seem quite unlikely that the RMD requirements would not be satisfied before the end of the year.Jack FFR1846 wrote: ↑Mon Feb 17, 2020 1:49 pm Here's what I would be asking anyone providing automatic RMD withdrawal services:
Who pays the penalty when you screw things up?
With manual withdrawals, you can watch what's going on, rather than not knowing what's going on until it's too late. Personally, I'm not overly happy to accept a 50% penalty.
The Automatic RMD becomes a pending Automatic Fund Exchange or Automatic Withdrawal that you can see in your account. Transactions are scheduled to occur on a future date.
These pending transactions are probably one reason that the Automatic RMD can't make adjustments when other withdrawals are processed. There would also be the complexity of all the withdrawal and schedule options.
In the unlikely event that the RMD was not satisfied and a 50% penalty assessed, one can file IRS Form 5329 and request a waiver in section IX.
An Automatic RMD may still be worth setting up for those taking advantage of tax deferred compounding and withdrawing late in the year. A planned withdrawal might not take place for a variety of possible reasons.
Enjoying the Outdoors
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Awesome. Thanks Sport and Kaneohe!
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Pretty much agree with the above. It is CRITiCAL to make sure your tax software does this. In TT, there are two ways to do it. If you fill out the 1099R form yourself, you must scroll down and fill in the box for QCDs. If you use the Interview method, TT will ask if you made a QCD. In either case the proper numbers should appear in 4a and 4b of Form 1040 with "QCD" printed next to Line 4bsport wrote: ↑Tue Feb 18, 2020 10:58 amkaneohe is correct. Vanguard does not know if you are making a valid QCD in either case. All QCD withdrawals are categorized as "ordinary taxable withdrawals" on the 1099R. The QCD reduction is done on your 1040 tax form. Therefore, the only official documentation you have for a QCD is the letter of acknowledgement you get from the charity. So, you should keep track of those letters and if you do not get one, contact the charity and ask for it. If you should get audited by the IRS, you would need that. I also keep copies of the checks as a backup.kaneohe wrote: ↑Tue Feb 18, 2020 8:21 amI don't have VG IRA so no experience there. When my broker issues the QCD checks, the 1099R only reflects the QCD as withdrawals and they look taxable just like any other personal withdrawal. It is my understanding that this is normal and the QCD designation is something you are responsible for doing at tax time. Possibly the reason it is done this way is that the broker does not want to be responsible for blessing this as a legitimate QCD.....e.g. you may give to an charity that is not approved and broker does not want the responsibility for investigating.Prudence wrote: ↑Tue Feb 18, 2020 8:13 am ............................................................................
Also, if I do the QCD withdrawal using a Vanguard withdrawal transaction, it would be accounted for and reported by Vanguard at year-end as a non-taxable QCD. Whereas if I write a personal check from my money market fund, it would not, right? (all of the funds in my tIRA are taxable BTW)
I
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
You can suspend the RMD service. Note that a suspension has the same effect of cancelling the service.Electron wrote: ↑Mon Feb 17, 2020 12:55 pm I'd be interested in how others have handled QCDs or other withdrawals when Vanguard's Automatic RMD Service has already been set up.
The Vanguard RMD Service Agreement states the following:
"Any distribution you take prior to enrolling in the Service will reduce the RMD amount to be distributed through the Service in that year. After you enroll in the Service, distributions you take outside of the Service will not reduce the remaining RMD amount to be paid under the Service, except in certain instances when the Service is updated. This may result in you taking more than the minimum required amount."
It looks like any manual IRA withdrawals will not change amounts scheduled to be withdrawn by the Automatic RMD Service.
Is there a way to update the existing service to incorporate withdrawals already taken or is it necessary to cancel the service and enroll again?
Thanks for any information.
Afterwards, make QCD withdrawals. When all QCDs are completed, you can sign up for the RMD service again.
If you plan to do QCDs every year, it may be better not to enroll in the RMD service.
-
- Posts: 2775
- Joined: Mon Mar 27, 2017 10:47 pm
- Location: CA
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
How do you find the exact official 12/31 account balance? Do you go by the statement? When I log on to Vanguard or Fidelity, I can only see the current balance only.sport wrote: ↑Mon Feb 17, 2020 7:37 pmYou don't have to estimate the RMD, you can calculate it exactly yourself. You use your December 31 account balance and the divisor from the appropriate table in IRS Pub 509B. I do this to verify that Vanguard has calculated it correctly. I have never found them to be wrong, but I check to be sure.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Yes, look at your year end statements.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Some year end statements will show a total value including accrued income (interest and dividends). The accrued income should be backed out, or the total without it should be used for RMD purposes (and also for line 6 of Form 8606 purposes, if applicable). The result should agree with the Form 5498 year end balance sent to the IRS.MathIsMyWayr wrote: ↑Wed Feb 19, 2020 7:46 amHow do you find the exact official 12/31 account balance? Do you go by the statement? When I log on to Vanguard or Fidelity, I can only see the current balance only.sport wrote: ↑Mon Feb 17, 2020 7:37 pmYou don't have to estimate the RMD, you can calculate it exactly yourself. You use your December 31 account balance and the divisor from the appropriate table in IRS Pub 509B. I do this to verify that Vanguard has calculated it correctly. I have never found them to be wrong, but I check to be sure.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Does anyone know if H&R Block software allows the same two ways to fill in the QCD reduction?pshonore wrote: ↑Tue Feb 18, 2020 3:37 pmPretty much agree with the above. It is CRITiCAL to make sure your tax software does this. In TT, there are two ways to do it. If you fill out the 1099R form yourself, you must scroll down and fill in the box for QCDs. If you use the Interview method, TT will ask if you made a QCD. In either case the proper numbers should appear in 4a and 4b of Form 1040 with "QCD" printed next to Line 4bsport wrote: ↑Tue Feb 18, 2020 10:58 amkaneohe is correct. Vanguard does not know if you are making a valid QCD in either case. All QCD withdrawals are categorized as "ordinary taxable withdrawals" on the 1099R. The QCD reduction is done on your 1040 tax form. Therefore, the only official documentation you have for a QCD is the letter of acknowledgement you get from the charity. So, you should keep track of those letters and if you do not get one, contact the charity and ask for it. If you should get audited by the IRS, you would need that. I also keep copies of the checks as a backup.kaneohe wrote: ↑Tue Feb 18, 2020 8:21 amI don't have VG IRA so no experience there. When my broker issues the QCD checks, the 1099R only reflects the QCD as withdrawals and they look taxable just like any other personal withdrawal. It is my understanding that this is normal and the QCD designation is something you are responsible for doing at tax time. Possibly the reason it is done this way is that the broker does not want to be responsible for blessing this as a legitimate QCD.....e.g. you may give to an charity that is not approved and broker does not want the responsibility for investigating.Prudence wrote: ↑Tue Feb 18, 2020 8:13 am ............................................................................
Also, if I do the QCD withdrawal using a Vanguard withdrawal transaction, it would be accounted for and reported by Vanguard at year-end as a non-taxable QCD. Whereas if I write a personal check from my money market fund, it would not, right? (all of the funds in my tIRA are taxable BTW)
I
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Thanks for the reply. The Automatic RMD does allow you to View or Edit the details which I went through recently to change the date of the distribution. Any change results in a new confirmation document.
I'm hoping that the edit process picks up any manual withdrawals and provides an easy update on the remaining balance. That is something I might test later in the year.
Enjoying the Outdoors
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Both Vanguard and Fidelity give the amount I need to withhold for RMDs each year. I then double check my statements for 12/31 to see if they got the amount correct. Then I do my own calculation. They have always been correct. Steps for VanguardMathIsMyWayr wrote: ↑Wed Feb 19, 2020 7:46 amHow do you find the exact official 12/31 account balance? Do you go by the statement? When I log on to Vanguard or Fidelity, I can only see the current balance only.sport wrote: ↑Mon Feb 17, 2020 7:37 pmYou don't have to estimate the RMD, you can calculate it exactly yourself. You use your December 31 account balance and the divisor from the appropriate table in IRS Pub 509B. I do this to verify that Vanguard has calculated it correctly. I have never found them to be wrong, but I check to be sure.
1. Go to my Accounts.
2. Click on Retirements Contributions, Distributions and RMDs
3. In the contributions section make sure that you have the correct year.
4. Click on Middle tab - Retirement Minimum Distributions.
This is how my screen looks after I have clicked on RMDs
Retirement summary
Contributions Distributions Required minimum distribution (RMD) Retirement planning
Congratulations! You've satisfied your RMD for your Vanguard accounts this year.
Your RMD calculation for 2020—IRAs
RMD amount you must take by 12/31/2020 .........$xxxxx
Distributions you've taken year to date ..............$xxxxx
Remaining RMD amount ..............................$0.00
If I click on the Distributions tab, it gives me the details of the date, distribution and tax withheld.
This activity is reflected in various places. I get an email when the check is made. This is an example in the confirmation tab.
Activity in your settlement fund that generated a confirmation is displayed below.
Trade date Transaction Amount
01/24/2020 Check #1102092 issued to
CHARITY NAME
C/O MY NAME AND ADDRESS
When I receive the check, I tear off the name of the charity as well as the details of the check and then mail it to the charity. I ask them for a confirmation.
The information is stored in many locations and it is simple .. once you get used to the process.
Lynette
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
I think I used the HRB interview method when entered RMD info, but I often go back to check and/or adjust figures, since I often start with estimates in some fields before the tax docs show up. That said, my finished 1040SR line 4a IRA Distributions has a notation "QCD" and line 4b Taxable Amount is my full RMD minus QCD and the (tiny) non-deductible portion. You should be fine with HRB.Prudence wrote: ↑Wed Feb 19, 2020 12:39 pmDoes anyone know if H&R Block software allows the same two ways to fill in the QCD reduction?pshonore wrote: ↑Tue Feb 18, 2020 3:37 pmPretty much agree with the above. It is CRITiCAL to make sure your tax software does this. In TT, there are two ways to do it. If you fill out the 1099R form yourself, you must scroll down and fill in the box for QCDs. If you use the Interview method, TT will ask if you made a QCD. In either case the proper numbers should appear in 4a and 4b of Form 1040 with "QCD" printed next to Line 4bsport wrote: ↑Tue Feb 18, 2020 10:58 amkaneohe is correct. Vanguard does not know if you are making a valid QCD in either case. All QCD withdrawals are categorized as "ordinary taxable withdrawals" on the 1099R. The QCD reduction is done on your 1040 tax form. Therefore, the only official documentation you have for a QCD is the letter of acknowledgement you get from the charity. So, you should keep track of those letters and if you do not get one, contact the charity and ask for it. If you should get audited by the IRS, you would need that. I also keep copies of the checks as a backup.kaneohe wrote: ↑Tue Feb 18, 2020 8:21 amI don't have VG IRA so no experience there. When my broker issues the QCD checks, the 1099R only reflects the QCD as withdrawals and they look taxable just like any other personal withdrawal. It is my understanding that this is normal and the QCD designation is something you are responsible for doing at tax time. Possibly the reason it is done this way is that the broker does not want to be responsible for blessing this as a legitimate QCD.....e.g. you may give to an charity that is not approved and broker does not want the responsibility for investigating.Prudence wrote: ↑Tue Feb 18, 2020 8:13 am ............................................................................
Also, if I do the QCD withdrawal using a Vanguard withdrawal transaction, it would be accounted for and reported by Vanguard at year-end as a non-taxable QCD. Whereas if I write a personal check from my money market fund, it would not, right? (all of the funds in my tIRA are taxable BTW)
I
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Now that I am retired, I decided that I needed to learn what my accountant was doing so I filled out the 1040 manually by reading the instructions. Then I bought the HR Block software to see how this worked. I will have my accountant do the real work and be able to verify if I was correct.
I was able to get the HR Block software to print QCD on Line 4c of the 1040. I think whether you import the 1099R or enter it manually, it is critical is to ensure that you fill in both boxes for line 7 in the HR Block software. My 1099R has Box 7 in the Distribution Code. Next to it is box IRA/SEP/Simple with an X in it. Using the HR Block software, I entered 7 for Distribution Code and then in the next box I chose K - IRA without readily available FMV (whatever that is!). After a few more screens with questions, I came to the question - about whether all or only part of it was a QCD. On the next screen I had the opportunity to enter the QCD amount.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Super, thank you. I will be making my first QCD in 2020 so I will confirm that it works for me next year.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Last year I noticed the same thing with my two IRA accounts. It turned out that I had to calculate the RMD for each account separately and then add the two amounts for the combined total. Rounding comes into play.
Vanguard's calculation was correct.
Enjoying the Outdoors
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Can anyone answer this. For the Vanguard automatic RMD service, can they take the RMD from any mutual fund or ETF in your account, or only from Vanguard mutual funds?
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
I do not use the automatic withdrawal service, just VG's calculation of each year's RMD. That is so I can adjust withholding to get to the safe harbor amount for income tax.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
Gary,
I don't know the answer to your question, but you could always move the amount of your RMD from various funds in the IRA into a VG cash/settlement fund in your IRA early in the year and direct the Auto RMD service to distribute from that fund. Actually, you could even move an estimate of the RMD the previous year. Doesn't matter as long as it is all within the IRA.
I don't use the auto RMD service, but I start the year out with enough in my IRA cash/settlement fund so that I can easily do QCDs or other distributions later in the year without pondering what is moving up or down each time.
Re: Vanguard's Automatic RMD Service, QCDs, and Other Withdrawals
My Vanguard 2020 RMD Service Agreement states the following under Distribution options:
"You can take your RMD amount only from Vanguard mutual funds."
I believe this is because you can only withdraw an exact dollar amount from a mutual fund. You can't do that with a stock or ETF where trades are done with some number of whole shares at an unknown price.
One solution with the stock or ETF is to manually sell enough shares to cover the RMD which would then be taken from the settlement fund.
Last edited by Electron on Sat Aug 01, 2020 1:52 pm, edited 1 time in total.
Enjoying the Outdoors