RMDs May Not Be Required for 2020

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Silk McCue
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Re: IRS Suspends RMD

Post by Silk McCue »

dual wrote: Sun Mar 29, 2020 1:14 pm
Alan S. wrote: Fri Mar 27, 2020 4:57 pm Yes, still count. You can do a QCD as part of your RMD or separately. In fact, those who will start RMDs at 72 will have either one or two tax years prior to RMDs in which they can do a QCD, which is still allowed at 70.5. 2020 will function like one of those years.
Please provide a reference for this statement. This would involve many $thousands so, much as I trust Bogleheads, this is trust but verify territory for me. :)
The age for QCDs did not change as a part of the Secure Act. It remains at 70.5. This was discussed in a number of threads as soon as the act was signed into law.

Ed Slott is referenced in this article which makes it clear that 70.5 stands. If you are still contributing to an IRA at that time things get complicated.

https://www.kiplinger.com/article/reti ... -qcds.html

Cheers
kaneohe
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Re: RMDs May Not Be Required for 2020

Post by kaneohe »

willift wrote: Sun Mar 29, 2020 1:10 pm
kaneohe wrote: Sun Mar 29, 2020 1:02 pm
willift wrote: Sun Mar 29, 2020 12:22 pm .....................................................

A question about QCDs.
If I don't have any RMD for 2020, doesn't that imply that I wont have any money available for a QCD. I thought QCDs were limited to your RMD $ total or 100K whichever was smaller.
Your last statement is not correct. https://www.kiplinger.com/article/taxes ... -know.html
Help me understand. I read these lines from the Kiplinger article and it makes me think the QCD is tied to your RMD amount

"If this sounds like a strategy that could work for you, here are some things you need to know:
Each person can donate the full amount of his or her RMD, up to a maximum of $100,000 annually."
good find.........that is poor writing susceptible to misunderstanding. I missed that part.
but note on pt 5 is :

"You can make a QCD that exceeds your RMD for a given year. However, that extra distribution can’t be carried over to meet the RMDs for future years." sometimes you need a big picture bird's eye view to make up for the writer's
deficiencies. There is no relation between RMD size and QCD size unless you want to optimize and not take more than needed............. your RMD. Then you make sure that the QCD is included in the RMD so that only RMD is taken. If you forget and take your RMD first, then the QCD can still be taken but you will have withdrawn more than necessary.......RMD + QCD.
willift
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Re: RMDs May Not Be Required for 2020

Post by willift »

Thanks I think that clears things up.
My take away.
As long as you're 70+ a half you can make a QCD of up to 100k annually without adding to taxable income.

Willift
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celia
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Re: IRS Suspends RMD

Post by celia »

JW-Retired wrote: Sun Mar 29, 2020 1:32 pm Alan,
In my case it's still in a 401k, but I'm way into my RMD years and need the money. It's been set up on an autopilot so the 401k administrator sends me the RMD amount in a couple of pieces on fixed dates of the year. If I do nothing will they still send me the RMD amounts.... or will I need to do something?
thanks,
JW
I’m not Alan, but if you need the RMDs, you don’t need to do anything to keep them coming. If you don’t want them anymore this year, then you should contact the 401K administrator.
sport
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Re: IRS Suspends RMD

Post by sport »

celia wrote: Sun Mar 29, 2020 4:12 pm
JW-Retired wrote: Sun Mar 29, 2020 1:32 pm Alan,
In my case it's still in a 401k, but I'm way into my RMD years and need the money. It's been set up on an autopilot so the 401k administrator sends me the RMD amount in a couple of pieces on fixed dates of the year. If I do nothing will they still send me the RMD amounts.... or will I need to do something?
thanks,
JW
I’m not Alan, but if you need the RMDs, you don’t need to do anything to keep them coming. If you don’t want them anymore this year, then you should contact the 401K administrator.
You can also change the amount of the distributions. You can make it less than the former RMD requirement if you wish.
JW-Retired
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Re: IRS Suspends RMD

Post by JW-Retired »

celia wrote: Sun Mar 29, 2020 4:12 pm
JW-Retired wrote: Sun Mar 29, 2020 1:32 pm Alan,
In my case it's still in a 401k, but I'm way into my RMD years and need the money. It's been set up on an autopilot so the 401k administrator sends me the RMD amount in a couple of pieces on fixed dates of the year. If I do nothing will they still send me the RMD amounts.... or will I need to do something?
thanks,
JW
I’m not Alan, but if you need the RMDs, you don’t need to do anything to keep them coming. If you don’t want them anymore this year, then you should contact the 401K administrator.
That's it! I hoped to keep then coming without me needing to do anything.
Thank you celia.
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celia
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Re: IRS Suspends RMD

Post by celia »

dual wrote: Sun Mar 29, 2020 1:14 pm
Alan S. wrote: Fri Mar 27, 2020 4:57 pm Yes, still count. You can do a QCD as part of your RMD or separately. In fact, those who will start RMDs at 72 will have either one or two tax years prior to RMDs in which they can do a QCD, which is still allowed at 70.5. 2020 will function like one of those years.
Please provide a reference for this statement. This would involve many $thousands so, much as I trust Bogleheads, this is trust but verify territory for me. :)
dual, Do you still need a reference? Since you referred to several sentences, it is impossible to tell which part(s) are unsure to you. The IRS will not have something like this in its instructions. It is partly explained by how “RMD”, “QCD”, “2020 RMD waived” are defined and how they can interact with each other. The 2017 SECURE Act moved the RMD start date from the year you turn 70.5 to the year you turn 72.0. Then last week’s CARES act waived the 2020 RMD.

Since IRS taxpayer publications come out after each year closes and you won’t want to wait till then, the “official” IRS rules is the law that the IRS and taxpayers have to follow. To read what you are looking for, you’d need to search the legalese Congress just passed, past IRS publications for definitions, then figure out how to make it actionable, like major posters on this forum (and in other publications) already have. In other words, there won’t be one authoritative source for you to look at. Hope this helps.
kaneohe
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Re: IRS Suspends RMD

Post by kaneohe »

celia wrote: Sun Mar 29, 2020 5:07 pm
dual wrote: Sun Mar 29, 2020 1:14 pm
Alan S. wrote: Fri Mar 27, 2020 4:57 pm Yes, still count. You can do a QCD as part of your RMD or separately. In fact, those who will start RMDs at 72 will have either one or two tax years prior to RMDs in which they can do a QCD, which is still allowed at 70.5. 2020 will function like one of those years.
Please provide a reference for this statement. This would involve many $thousands so, much as I trust Bogleheads, this is trust but verify territory for me. :)
dual, Do you still need a reference? Since you referred to several sentences, it is impossible to tell which part(s) are unsure to you. The IRS will not have something like this in its instructions. It is partly explained by how “RMD”, “QCD”, “2020 RMD waived” are defined and how they can interact with each other. The 2017 SECURE Act moved the RMD start date from the year you turn 70.5 to the year you turn 72.0. Then last week’s CARES act waived the 2020 RMD.

Since IRS taxpayer publications come out after each year closes and you won’t want to wait till then, the “official” IRS rules is the law that the IRS and taxpayers have to follow. To read what you are looking for, you’d need to search the legalese Congress just passed, past IRS publications for definitions, then figure out how to make it actionable, like major posters on this forum (and in other publications) already have. In other words, there won’t be one authoritative source for you to look at. Hope this helps.
A link to Alan S. may be as good as it gets. An expert's translation of hard-to-understand stuff rather than trying to decipher the original documents yourself.
sport
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Re: IRS Suspends RMD

Post by sport »

JW-Retired wrote: Sun Mar 29, 2020 4:47 pm
celia wrote: Sun Mar 29, 2020 4:12 pm
JW-Retired wrote: Sun Mar 29, 2020 1:32 pm Alan,
In my case it's still in a 401k, but I'm way into my RMD years and need the money. It's been set up on an autopilot so the 401k administrator sends me the RMD amount in a couple of pieces on fixed dates of the year. If I do nothing will they still send me the RMD amounts.... or will I need to do something?
thanks,
JW
I’m not Alan, but if you need the RMDs, you don’t need to do anything to keep them coming. If you don’t want them anymore this year, then you should contact the 401K administrator.
That's it! I hoped to keep then coming without me needing to do anything.
Thank you celia.
JW
JW,
You may want to check with your 401k administrator to make certain they will do what you want. Just to make sure.
kaneohe
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Re: RMDs May Not Be Required for 2020

Post by kaneohe »

Small Savanna wrote: Sat Mar 28, 2020 11:16 am
MathIsMyWayr wrote: Sat Mar 28, 2020 10:43 am
Small Savanna wrote: Sat Mar 28, 2020 9:56 am Even if RMDs are not required, it may be advantageous to take distributions now - I moved funds from VTSAX in a Vanguard inherited IRA into my regular Vanguard account two weeks ago, keeping them in VTSAX. By doing it now when the market is down, I pay less in taxes on the transferred shares, and future growth in value of the shares will be taxed at the capital gains rate rather than as ordinary income.
Why are taxable accounts better than tax-deferred accounts except in unusual cases?
This is a complicated subject that has been addressed in many threads by people more knowledgeable than me. It involves speculation about whether the market will go up or down, what future tax rates will be, and what your personal marginal bracket will be in the future. But let's say I move 100 shares of VTSAX at $61 per share from an IRA to a regular Vanguard account in 2020. I'll pay $6100 * 24% in federal taxes this year = $1464. Now suppose that I sell those shares in 2023 for $90 per share. I'll pay an additional 15% on the gain: 100*(90-61)*15% = $435. Total tax bill is $1899. On the other hand, if I leave the 100 shares in the IRA and withdraw them in 2023, I'll pay $9000 * 24% = $2160 in taxes.

This example assumes I will stay in the 24% marginal bracket. I personally think that tax rates will go up in the future, but others may differ.
I agree w/ the idea about growth in a taxable account being more favorable due to CG rates. The one accounting part that I have not reconciled. When you move the shares to taxable in 2020, there is tax due. You can either pay w/ outside funds and ignore it (this assumes your cash hoard is large and perhaps non-optimum)or you can assign the tax cost to the withdrawal which would reduce the amount in the taxable acct. On a steady-state basis this might not be sustainable since it would eat into your cash stash.
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dual
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Re: IRS Suspends RMD

Post by dual »

celia wrote: Sun Mar 29, 2020 5:07 pm
dual, Do you still need a reference? Since you referred to several sentences, it is impossible to tell which part(s) are unsure to you. The IRS will not have something like this in its instructions. It is partly explained by how “RMD”, “QCD”, “2020 RMD waived” are defined and how they can interact with each other. The 2017 SECURE Act moved the RMD start date from the year you turn 70.5 to the year you turn 72.0. Then last week’s CARES act waived the 2020 RMD.

Since IRS taxpayer publications come out after each year closes and you won’t want to wait till then, the “official” IRS rules is the law that the IRS and taxpayers have to follow. To read what you are looking for, you’d need to search the legalese Congress just passed, past IRS publications for definitions, then figure out how to make it actionable, like major posters on this forum (and in other publications) already have. In other words, there won’t be one authoritative source for you to look at. Hope this helps.
Thanks for the followup. Yes, I can see how my question was ambiguous. My question was whether I could do a QCD even if no RMD is required. It looks like item 5 of the Kiplinger reference http://www.kiplinger.com/article/taxes/ ... -know.html answers that I can.

If the IRS ever questions my QCD payment I will try to run kiplinger up the flag pole to see if anyone salutes :shock:
Small Savanna
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Re: RMDs May Not Be Required for 2020

Post by Small Savanna »

kaneohe wrote: Sun Mar 29, 2020 7:01 pm
Small Savanna wrote: Sat Mar 28, 2020 11:16 am
MathIsMyWayr wrote: Sat Mar 28, 2020 10:43 am
Small Savanna wrote: Sat Mar 28, 2020 9:56 am Even if RMDs are not required, it may be advantageous to take distributions now - I moved funds from VTSAX in a Vanguard inherited IRA into my regular Vanguard account two weeks ago, keeping them in VTSAX. By doing it now when the market is down, I pay less in taxes on the transferred shares, and future growth in value of the shares will be taxed at the capital gains rate rather than as ordinary income.
Why are taxable accounts better than tax-deferred accounts except in unusual cases?
This is a complicated subject that has been addressed in many threads by people more knowledgeable than me. It involves speculation about whether the market will go up or down, what future tax rates will be, and what your personal marginal bracket will be in the future. But let's say I move 100 shares of VTSAX at $61 per share from an IRA to a regular Vanguard account in 2020. I'll pay $6100 * 24% in federal taxes this year = $1464. Now suppose that I sell those shares in 2023 for $90 per share. I'll pay an additional 15% on the gain: 100*(90-61)*15% = $435. Total tax bill is $1899. On the other hand, if I leave the 100 shares in the IRA and withdraw them in 2023, I'll pay $9000 * 24% = $2160 in taxes.

This example assumes I will stay in the 24% marginal bracket. I personally think that tax rates will go up in the future, but others may differ.
I agree w/ the idea about growth in a taxable account being more favorable due to CG rates. The one accounting part that I have not reconciled. When you move the shares to taxable in 2020, there is tax due. You can either pay w/ outside funds and ignore it (this assumes your cash hoard is large and perhaps non-optimum)or you can assign the tax cost to the withdrawal which would reduce the amount in the taxable acct. On a steady-state basis this might not be sustainable since it would eat into your cash stash.
The tax hit in the current year is a downside to this strategy, whether you're moving money into a taxable account or doing a Roth conversion. I'm doing some of both - backdoor Roth through an IRA account where some of the contributions in prior years were tax deferred, and moving distributions from an inherited IRA into a taxable account. I'm doing this over several years at a small enough level that the extra taxes are a few $K per year, so I've just increased the withholding on my pay to make up for it.
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celia
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Re: IRS Suspends RMD

Post by celia »

dual wrote: Sun Mar 29, 2020 9:36 pm My question was whether I could do a QCD even if no RMD is required. It looks like item 5 of the Kiplinger reference http://www.kiplinger.com/article/taxes/ ... -know.html answers that I can.
Yes, a QCD is just a withdrawal but instead of going into your account, it goes to a charity’s account. You can always take out more than the minimum required (which is 0 this year).

The QCD benefit is reserved only for those over 70.5. Go for it. The charity will appreciate it.
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Re: IRS Suspends RMD

Post by cherijoh »

Lynette wrote: Fri Mar 27, 2020 7:11 pm Bit of mess being too quick! In January I took QCDs, RMDs and had tax withheld. I do not want to reverse the RMDs. I did this early to simplify my taxes. Oh well.


I think you are missing a key point. You took your QCDs and RMDs when the valuation was still high, so you withdrew a lot fewer shares to get to the $$ amount required or your RMD and your charities got the money early.

If I were you, I'd be patting myself on the back for doing it early. :D
Lynette
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Re: IRS Suspends RMD

Post by Lynette »

cherijoh wrote: Mon Mar 30, 2020 7:58 am
Lynette wrote: Fri Mar 27, 2020 7:11 pm Bit of mess being too quick! In January I took QCDs, RMDs and had tax withheld. I do not want to reverse the RMDs. I did this early to simplify my taxes. Oh well.


I think you are missing a key point. You took your QCDs and RMDs when the valuation was still high, so you withdrew a lot fewer shares to get to the $$ amount required or your RMD and your charities got the money early.

If I were you, I'd be patting myself on the back for doing it early. :D
Yes, thanks. I did not think about that. I have not read the whole thread but does this mean that the withdrawals will still count as QCDs and RMDs? I do not want to have to try to convert the RMDs into Roth or anything that will complicate my tax life in 2020. I am grateful for the advice given by Bogleheads and now my taxes are far simpler - no buying or selling or trying to be clever with market timing. I worked into my seventies to increase my pension so these and SS cover my basic needs. Now I do not have to worry about what the market is doing.
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Re: IRS Suspends RMD

Post by pshonore »

Lynette wrote: Mon Mar 30, 2020 8:26 am
cherijoh wrote: Mon Mar 30, 2020 7:58 am
Lynette wrote: Fri Mar 27, 2020 7:11 pm Bit of mess being too quick! In January I took QCDs, RMDs and had tax withheld. I do not want to reverse the RMDs. I did this early to simplify my taxes. Oh well.


I think you are missing a key point. You took your QCDs and RMDs when the valuation was still high, so you withdrew a lot fewer shares to get to the $$ amount required or your RMD and your charities got the money early.

If I were you, I'd be patting myself on the back for doing it early. :D
Yes, thanks. I did not think about that. I have not read the whole thread but does this mean that the withdrawals will still count as QCDs and RMDs? I do not want to have to try to convert the RMDs into Roth or anything that will complicate my tax life in 2020. I am grateful for the advice given by Bogleheads and now my taxes are far simpler - no buying or selling or trying to be clever with market timing. I worked into my seventies to increase my pension so these and SS cover my basic needs. Now I do not have to worry about what the market is doing.
The QCDs will still count - meaning you made a tax free contribution to charity. The RMDs will not count (since they're not required this year) nor will they reduce future RMDs (other than having a slightly lower balance on which to figure future RMDs). Consider them just another IRA distribution which increased your taxable account balances.
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Re: IRS Suspends RMD

Post by Lynette »

pshonore wrote: Mon Mar 30, 2020 8:44 am
Lynette wrote: Mon Mar 30, 2020 8:26 am
cherijoh wrote: Mon Mar 30, 2020 7:58 am
Lynette wrote: Fri Mar 27, 2020 7:11 pm Bit of mess being too quick! In January I took QCDs, RMDs and had tax withheld. I do not want to reverse the RMDs. I did this early to simplify my taxes. Oh well.


I think you are missing a key point. You took your QCDs and RMDs when the valuation was still high, so you withdrew a lot fewer shares to get to the $$ amount required or your RMD and your charities got the money early.

If I were you, I'd be patting myself on the back for doing it early. :D
Yes, thanks. I did not think about that. I have not read the whole thread but does this mean that the withdrawals will still count as QCDs and RMDs? I do not want to have to try to convert the RMDs into Roth or anything that will complicate my tax life in 2020. I am grateful for the advice given by Bogleheads and now my taxes are far simpler - no buying or selling or trying to be clever with market timing. I worked into my seventies to increase my pension so these and SS cover my basic needs. Now I do not have to worry about what the market is doing.
The QCDs will still count - meaning you made a tax free contribution to charity. The RMDs will not count (since they're not required this year) nor will they reduce future RMDs (other than having a slightly lower balance on which to figure future RMDs). Consider them just another IRA distribution which increased your taxable account balances.
Thank you. Hopefully life will be back to normal by April, 2021. It seems very far away.
cherijoh
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Re: RMDs May Not Be Required for 2020

Post by cherijoh »

Small Savanna wrote: Sat Mar 28, 2020 12:48 pm I don't think it's confusing at all. In the specific example I gave, if I take the RMD now and sell the shares in 2023, I'll have $9000 - $1899 = $7101 in my pocket in 2023. If I wait and take the IRA distribution in 2023, I will have $9000 - $2160 = $6840 in my pocket in 2023. This works because capital gains rates are lower than ordinary rates. If you think I'm wrong, be specific and give your example.
You are making way too many assumptions over which you have no control.

You have no idea what the shares will be worth in the future! WRT RMDs that also means you have no idea how many shares you would have to sell to reach your RMD if you didn't sell. This in turn influences your RMDs in the future.

IMO you are also asking/answering the wrong question. The correct question is how would this decision impact your lifetime cashflow from your inherited IRA. And there is no way to evaluate that in advance!
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Re: IRS Suspends RMD

Post by JW-Retired »

sport wrote: Sun Mar 29, 2020 6:45 pm
JW-Retired wrote: Sun Mar 29, 2020 4:47 pm
celia wrote: Sun Mar 29, 2020 4:12 pm
JW-Retired wrote: Sun Mar 29, 2020 1:32 pm Alan,
In my case it's still in a 401k, but I'm way into my RMD years and need the money. It's been set up on an autopilot so the 401k administrator sends me the RMD amount in a couple of pieces on fixed dates of the year. If I do nothing will they still send me the RMD amounts.... or will I need to do something?
thanks,
JW
I’m not Alan, but if you need the RMDs, you don’t need to do anything to keep them coming. If you don’t want them anymore this year, then you should contact the 401K administrator.
That's it! I hoped to keep then coming without me needing to do anything.
Thank you celia.
JW
JW,
You may want to check with your 401k administrator to make certain they will do what you want. Just to make sure.
I will check to make sure.
JW
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Small Savanna
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Re: RMDs May Not Be Required for 2020

Post by Small Savanna »

cherijoh wrote: Mon Mar 30, 2020 9:30 am
Small Savanna wrote: Sat Mar 28, 2020 12:48 pm I don't think it's confusing at all. In the specific example I gave, if I take the RMD now and sell the shares in 2023, I'll have $9000 - $1899 = $7101 in my pocket in 2023. If I wait and take the IRA distribution in 2023, I will have $9000 - $2160 = $6840 in my pocket in 2023. This works because capital gains rates are lower than ordinary rates. If you think I'm wrong, be specific and give your example.
You are making way too many assumptions over which you have no control.

You have no idea what the shares will be worth in the future! WRT RMDs that also means you have no idea how many shares you would have to sell to reach your RMD if you didn't sell. This in turn influences your RMDs in the future.

IMO you are also asking/answering the wrong question. The correct question is how would this decision impact your lifetime cashflow from your inherited IRA. And there is no way to evaluate that in advance!
I acknowledge that nobody (including me) can predict the future. But in the face of the unknown, I still have to make a decision about how large a distribution to take this year. The default decision is to only take the required minimum distribution because it's "required." I'm just suggesting that might not be the right answer.
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RMD not required for 2020 per bail out bill?

Post by Indianrock »

[Merged into the ongoing discussion -- moderator oldcomputerguy]

I was in a hurry when I skimmed one article that said people did not have to take their required minimum distributions for 2020 ....it was a part of the government bailout bill passed last week. Can anyone confirm that?
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Re: RMD not required for 2020 per bail out bill?

Post by Indianrock »

Oh there it is ...read down a few paragraphs and you'll see it

https://www.cnbc.com/2020/03/25/what-th ... ement.html
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2020 RMD deferred or eliminated?

Post by mchlfnd »

[Thread merged into here, see below. --admin LadyGeek]

Hello,
For those already taking Rmds, if you skip RMD for 2020, do you need to take 2 rmds in 2021?
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Re: 2020 RMD deferred or eliminated?

Post by terran »

Eliminated.
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Re: 2020 RMD deferred or eliminated?

Post by Alan S. »

2020 RMDs were waived entirely.

While that will result in your 12/31/2020 balance used to determine your 2021 RMD to being 4-6% higher, that total balance will likely still be lower due to the bear market and 0 interest rates. And even lower if you have to take 2020 distributions to live on, CV or otherwise.
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Re: RMDs May Not Be Required for 2020

Post by LadyGeek »

I merged mchlfnd's thread into the on-going discussion.
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Re: IRS Suspends RMD

Post by 1210sda »

celia wrote: Sun Mar 29, 2020 10:41 pm You can always take out more than the minimum required (which is 0 this year).
As I understand it, the tax benefit of a RMD/QCD is that you don't pay tax on the RMD. I'm not sure I understand the tax benefit of making a QCD in excess of your RMD.

For example, if you had an RMD of $25,000 and you made a QCD of $25,000 you would not have to pay any tax on the distribution.

If instead, you made a QCD of $35,000,(RMD remains $25,000) you still wouldn't have to pay any tax on the distribution.

So if saving taxes was your intent, the additional $10,000 does not do that. It just reduces your IRA balance. (although I'm sure the charity appreciates it.)

Is this not correct?
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Re: IRS Suspends RMD

Post by sport »

1210sda wrote: Sat Apr 04, 2020 4:24 pm
celia wrote: Sun Mar 29, 2020 10:41 pm You can always take out more than the minimum required (which is 0 this year).
As I understand it, the tax benefit of a RMD/QCD is that you don't pay tax on the RMD. I'm not sure I understand the tax benefit of making a QCD in excess of your RMD.

For example, if you had an RMD of $25,000 and you made a QCD of $25,000 you would not have to pay any tax on the distribution.

If instead, you made a QCD of $35,000,(RMD remains $25,000) you still wouldn't have to pay any tax on the distribution.

So if saving taxes was your intent, the additional $10,000 does not do that. It just reduces your IRA balance. (although I'm sure the charity appreciates it.)

Is this not correct?
That is correct. However, if someone has plenty of money and wants to make extra charitable donations, that is one way they can do it. It may be preferable to using after tax money for the donations.
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Re: IRS Suspends RMD

Post by 1210sda »

sport wrote: Sat Apr 04, 2020 6:57 pm
1210sda wrote: Sat Apr 04, 2020 4:24 pm
celia wrote: Sun Mar 29, 2020 10:41 pm You can always take out more than the minimum required (which is 0 this year).
As I understand it, the tax benefit of a RMD/QCD is that you don't pay tax on the RMD. I'm not sure I understand the tax benefit of making a QCD in excess of your RMD.

For example, if you had an RMD of $25,000 and you made a QCD of $25,000 you would not have to pay any tax on the distribution.

If instead, you made a QCD of $35,000,(RMD remains $25,000) you still wouldn't have to pay any tax on the distribution.

So if saving taxes was your intent, the additional $10,000 does not do that. It just reduces your IRA balance. (although I'm sure the charity appreciates it.)

Is this not correct?
That is correct. However, if someone has plenty of money and wants to make extra charitable donations, that is one way they can do it. It may be preferable to using after tax money for the donations.
I agree QCD is better than after tax money if you want to make donations larger than your RMD. In addition, it would reduce your IRA balance and possibly allow for smaller RMD's in the future. Not so with after tax money.
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Re: IRS Suspends RMD

Post by celia »

1210sda wrote: Sat Apr 04, 2020 4:24 pm
celia wrote: Sun Mar 29, 2020 10:41 pm You can always take out more than the minimum required (which is 0 this year).
As I understand it, the tax benefit of a RMD/QCD is that you don't pay tax on the RMD. I'm not sure I understand the tax benefit of making a QCD in excess of your RMD.

For example, if you had an RMD of $25,000 and you made a QCD of $25,000 you would not have to pay any tax on the distribution.

If instead, you made a QCD of $35,000,(RMD remains $25,000) you still wouldn't have to pay any tax on the distribution.

So if saving taxes was your intent, the additional $10,000 does not do that. It just reduces your IRA balance. (although I'm sure the charity appreciates it.)

Is this not correct?
That is correct.

But when you have the majority of your assets in Roth and very little in TIRAs and you want to donate your usual amount (like you do each year), it is better to give from a TIRA than from taxable (as you wouldn’t have to pay any taxes on the QCD). This will also draw down future RMDs and simplify your life (and your heirs’ lives) when you no longer have to remember to take them.

Also note my signature line as you would prefer to hold on to taxable dollars instead of tax-deferred.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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1210sda
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Re: IRS Suspends RMD

Post by 1210sda »

celia wrote: Sun Apr 05, 2020 12:38 am That is correct.

But when you have the majority of your assets in Roth and very little in TIRAs and you want to donate your usual amount (like you do each year), it is better to give from a TIRA than from taxable (as you wouldn’t have to pay any taxes on the QCD). This will also draw down future RMDs and simplify your life (and your heirs’ lives) when you no longer have to remember to take them.

Also note my signature line as you would prefer to hold on to taxable dollars instead of tax-deferred.
Thank you. I agree with you in the specific scenario which you described.

I realize that for most folks, there are many, many variables to consider. The above scenario does not apply to me. But, it's good that our fellow BH's get to see the most appropriate way to proceed if their circumstances are similar to the ones you described.

Once again, thank you.
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Re: RMDs May Not Be Required for 2020

Post by cadillex »

thinking about the RMD i already took in JAN and FEB, 2 distributions total
95k .withheld about 25% to cover annual taxes from everywhere.
background : currently have 1.6M (was 1.9 on DEC 31st) in IRA and only 150k in ROTH, 1.3 m to spare in taxable account, all at vanguard.
i'm considering reversing the RMD, the full 95k, but will lose the taxes paid until April 2021.
big goal for me is to REDUCE the IRA value for 2 heirs(both in high tax brackets MFJ), due to 10yr RMD rule for them, SECURE act.
would it be a good idea to undo the RMD, full 95 k ?
and then do a ROTH conversion instead?
thus still reducing the IRA, and getting the money into a ROTH where SECURE act wont have impact.
OR would it be better to undo the RMD, and recoup the taxes in 2021. skip the conversion.
another factor is IRMAA tiers... doing the RMD, or the ROTH conversion,
bumps me up into the 2nd or 3rd tier for IRMAA, that is approx $1740 to $2784 extra for that year.
so many competing priorities, trying to figure out which yields best result to take advantage of this opportunity.
any thoughts ?
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Re: RMDs May Not Be Required for 2020

Post by Alan S. »

cadillex wrote: Fri Apr 10, 2020 7:35 pm thinking about the RMD i already took in JAN and FEB, 2 distributions total
95k .withheld about 25% to cover annual taxes from everywhere.
background : currently have 1.6M (was 1.9 on DEC 31st) in IRA and only 150k in ROTH, 1.3 m to spare in taxable account, all at vanguard.
i'm considering reversing the RMD, the full 95k, but will lose the taxes paid until April 2021.
big goal for me is to REDUCE the IRA value for 2 heirs(both in high tax brackets MFJ), due to 10yr RMD rule for them, SECURE act.
would it be a good idea to undo the RMD, full 95 k ?
and then do a ROTH conversion instead?
thus still reducing the IRA, and getting the money into a ROTH where SECURE act wont have impact.
OR would it be better to undo the RMD, and recoup the taxes in 2021. skip the conversion.
another factor is IRMAA tiers... doing the RMD, or the ROTH conversion,
bumps me up into the 2nd or 3rd tier for IRMAA, that is approx $1740 to $2784 extra for that year.
so many competing priorities, trying to figure out which yields best result to take advantage of this opportunity.
any thoughts ?
Without qualifying for a corona virus distribution, you cannot roll back the January distribution, but you can roll back the February distribution per IRS Notice 2020-23 UNLESS you rolled over another distribution in the 12 months prior to the Feb distribution. You have until 7/15 to roll back the Feb distribution portion of the 95k if eligible. You can replace with other funds the amount withheld from the Feb distribution.

An inherited Roth is still subject to the Secure Act. The difference here is that because the distribution will be non taxable the beneficiary can wait until the end of the 10 year period and then take a lump sum distribution with no tax impact. Earnings compound tax free in the meantime.

A conversion decision should be based on the comparison of the taxes you pay for the conversion (including any increased IRMAA surcharge) compared to the rate you would expect to pay on larger future RMDs if you did not convert. Some people may factor in the tax rates their beneficiaries would pay instead if they expect the beneficiaries to inherit most of the TIRA. Inherited Roth would be tax free.

Therefore, you would have to crunch all these numbers. In the end perhaps you hedge your bet and consider both a reduced tax bill this year if you do not convert all of it, and instead convert some but also reduce your taxes in 2020. Finally, keep tabs on future IRS guidance or relief bills from Congress with respect to whether you can rollover over the January distribution or not.
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Re: RMDs May Not Be Required for 2020

Post by NMBob »

Knowing something is possible, and not decided , does seem to be relevant information in setting decision timelines. Thanks for only locking the post and not removing it. My mother had asked about not making some sales in her ira for rmd while the market is so low. Then i saw this thread that also mentioned a previous history of RMD suspension. Glad we decided to postpone that decision on whether to continue with a sale to generate cash for withdrawal since waiting not even 2 weeks now changed her course of action to one more preferred.
cadillex
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Re: RMDs May Not Be Required for 2020

Post by cadillex »

thank you Alan
i am thinking i will watch for news about reversing the RMD for any distributions in the full year of 2020.
additionally
delay the reversal of the feb distribution, (or both if it becomes available) so as to capture as much growth outside the IRA as possible.
to minimize its value for heirs.
then do the roth up to an irmaa tier.
this is a work in progess !
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Re: RMDs May Not Be Required for 2020

Post by Abe »

My Vanguard Flagship representative just called me. She said our RMD's are being waived for this year, 2020.
She said we have the option of taking or not taking the distribution. Since we don't need the money to live on, I instructed her to cancel the automatic distribution for this year. This will lower our 2020 tax bill. :happy
ETA: When I just went to my VG account page, this is what it said:
2020 RMDs Waived
The CARES Act provides a temporary waiver of RMDs for 2020. You do not have to take your RMD for 2020 if you don't want to.
Learn more about the CARES Act here
Edit your RMD Service here
Slow and steady wins the race.
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Re: RMDs May Not Be Required for 2020

Post by PriceOfFreedom »

I hope that the forum can answer whether the corona virus distribution rules apply in my case:

I am retired for 5 years, took my 2020 RMD in early January 2020.
Wished to reverse the RMD in March when the CARES act passed, but more than 60 days had elapsed and I did not meet any of the exception conditions.
DW is still working, and today was informed that she would be furloughed beginning July (she will need to take an unpaid day off each month, thereby reducing her salary - she cannot take vacation in lieu)

In reading the pertinent sections of the CARES act (Section 2202), it is unclear to me whether her being furloughed allows me to reverse my January IRA RMD. The act allows an exception for "an individual who experiences adverse financial consequences as a result of being quarantined, being furloughed...". However, I am not the individual being furloughed, DW is.

We file a MFJ tax return. Does her being furloughed allow me to reverse my January 2020 IRA RMD?
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Re: RMDs May Not Be Required for 2020

Post by Alan S. »

PriceOfFreedom wrote: Tue Jun 09, 2020 10:57 pm I hope that the forum can answer whether the corona virus distribution rules apply in my case:

I am retired for 5 years, took my 2020 RMD in early January 2020.
Wished to reverse the RMD in March when the CARES act passed, but more than 60 days had elapsed and I did not meet any of the exception conditions.
DW is still working, and today was informed that she would be furloughed beginning July (she will need to take an unpaid day off each month, thereby reducing her salary - she cannot take vacation in lieu)

In reading the pertinent sections of the CARES act (Section 2202), it is unclear to me whether her being furloughed allows me to reverse my January IRA RMD. The act allows an exception for "an individual who experiences adverse financial consequences as a result of being quarantined, being furloughed...". However, I am not the individual being furloughed, DW is.

We file a MFJ tax return. Does her being furloughed allow me to reverse my January 2020 IRA RMD?
Unfortunately, at the moment any distributions she took or may take are CRDs, but you do not qualify for CRDs since you were not the one who lost hours. Therefore, your situation includes TWO provisions which have been criticized for being inconsistent with the intent of the CARES Act:
1) January distributions are the only ones that cannot be rolled back by 7/15 (subject to one rollover limit).
2) Family income is lost due to specified Covid reason, but the spouse who loses such income is the only eligible spouse for CRDs from their own retirement plans. The other spouse (you) is not.

However, there is still a decent chance you will be able to roll back the January distribution. Relief could result from the required IRS guidance which is expected to expand eligibility for CRDs or from future Congressional relief bills that address either of these two situations that leave you just outside the current relief provisions. Continue to monitor future developments. If the one rollover limitation a problem for you, you would then need to qualify for a CRD to be able to roll back the January distribution. But if you get January relief but do NOT qualify for a CRD and are subject to the one rollover limit, you could convert the January distribution to get around the one rollover limit.
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Re: RMDs May Not Be Required for 2020

Post by PriceOfFreedom »

Alan S, thank you for your quick reply. This seems like a silly restriction, since a person taking RMDs is unlikely to be working and therefore unlikely to have employment income affected by COVID. But I guess it is what it is.
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Re: RMDs May Not Be Required for 2020

Post by PriceOfFreedom »

To follow up on expanded rules re repaying 2020 RMD, the IRS has today issued further guidance as part of Notice 2020-50 https://www.irs.gov/newsroom/relief-for ... ment-plans.

If I read this correctly, a 2020 RMD can now be repaid by an individual whose spouse has been adversely financially affected by COVID-19 as follows:
As authorized under the CARES Act, Notice 2020-50 expands the definition of who is a qualified individual to take into account additional factors such as reductions in pay, rescissions of job offers, and delayed start dates with respect to an individual, as well as adverse financial consequences to an individual arising from the impact of the COVID-19 coronavirus on the individual's spouse or household member. As expanded under Notice 2020-50, a qualified individual is anyone who –

is diagnosed, or whose spouse or dependent is diagnosed, with the virus SARS-CoV-2 or the coronavirus disease 2019 (collectively, "COVID-19") by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetic Act); or

experiences adverse financial consequences as a result of the individual, the individual's spouse, or a member of the individual's household (that is, someone who shares the individual's principal residence):
being quarantined, being furloughed or laid off, or having work hours reduced due to COVID-19;
being unable to work due to lack of childcare due to COVID-19;
closing or reducing hours of a business that they own or operate due to COVID-19;
having pay or self-employment income reduced due to COVID-19; or
having a job offer rescinded or start date for a job delayed due to COVID-19.
Referring to my earlier posting, it would appear that if a spouse has been adversely financially affected (by, say, a furlough), an IRA holder can now repay a 2020 IRA RMD, even if it was taken in January. Is this a correct interpretation?
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Re: RMDs May Not Be Required for 2020

Post by kaneohe »

You need to be alert even though you have notified the custodians of your retirement plan not to withdraw the RMD for 2020. I notified all 5 of ours on 3/30. Today I get a notice that the June RMD was sent to our bank account.
I told them to take it back and document it as a custodial boo boo. After a long discussion w/ the back office they agreed to do something resembling that. Will see when the statement comes.
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Re: RMDs May Not Be Required for 2020

Post by Alan S. »

PriceOfFreedom wrote: Fri Jun 19, 2020 4:32 pm To follow up on expanded rules re repaying 2020 RMD, the IRS has today issued further guidance as part of Notice 2020-50 https://www.irs.gov/newsroom/relief-for ... ment-plans.

If I read this correctly, a 2020 RMD can now be repaid by an individual whose spouse has been adversely financially affected by COVID-19 as follows:
As authorized under the CARES Act, Notice 2020-50 expands the definition of who is a qualified individual to take into account additional factors such as reductions in pay, rescissions of job offers, and delayed start dates with respect to an individual, as well as adverse financial consequences to an individual arising from the impact of the COVID-19 coronavirus on the individual's spouse or household member. As expanded under Notice 2020-50, a qualified individual is anyone who –

is diagnosed, or whose spouse or dependent is diagnosed, with the virus SARS-CoV-2 or the coronavirus disease 2019 (collectively, "COVID-19") by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetic Act); or

experiences adverse financial consequences as a result of the individual, the individual's spouse, or a member of the individual's household (that is, someone who shares the individual's principal residence):
being quarantined, being furloughed or laid off, or having work hours reduced due to COVID-19;
being unable to work due to lack of childcare due to COVID-19;
closing or reducing hours of a business that they own or operate due to COVID-19;
having pay or self-employment income reduced due to COVID-19; or
having a job offer rescinded or start date for a job delayed due to COVID-19.
Referring to my earlier posting, it would appear that if a spouse has been adversely financially affected (by, say, a furlough), an IRA holder can now repay a 2020 IRA RMD, even if it was taken in January. Is this a correct interpretation?
Thanks for posting this.
Yes, the IRS has released expanded definition for CRD qualification here: https://www.irs.gov/pub/irs-drop/n-20-50.pdf

The relief includes many situations that have been posted here in recent weeks and generally conforms to what was expected. And this is not necessarily the final expansion of eligibility.

Note that there still is NO RELIEF for those who took January distributions who do NOT qualify for CRDs. Such relief must come from Congress in a future stimulus bill, since the IRS itself apparently does not have the authority to bring January distributions into their former rollover deadline extensions.
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Re: RMDs May Not Be Required for 2020

Post by LadyGeek »

Seasonal had originally posted an IRS announcement, which I moved into this thread. After notifying the moderators, I moved the post back into its own thread. This this is a major expansion of the previous waiver of RMDs that is not discussed in this thread.

See: All 2020 IRA RMD's may be returned
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