RMD Two in One Year

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Bigfish
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RMD Two in One Year

Post by Bigfish » Sat Feb 11, 2017 1:27 pm

My wife turns 70 on September 15th of this year. A friend who is a financial adviser told me she would be wise to take her first RMD after her birthday this year. Otherwise she would have to take two distributions in 2018. One after she turned 70 and 1/2 (March 2018) and then a second one after she turns 71 which would be in September of 2018. Is this correct?
Thanks
BF

sport
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Re: RMD Two in One Year

Post by sport » Sat Feb 11, 2017 1:44 pm

Bigfish wrote:My wife turns 70 on September 15th of this year. A friend who is a financial adviser told me she would be wise to take her first RMD after her birthday this year. Otherwise she would have to take two distributions in 2018. One after she turned 70 and 1/2 (March 2018) and then a second one after she turns 71 which would be in September of 2018. Is this correct?
Thanks
BF
No, that is not correct. The first year RMD is the year in which you reach 70.5, which is 2018 for your wife. So, there is no RMD required for her for 2017. She can take her first RMD any time in 2018, or she can defer some or all of it up until April 1, 2019. If she defers into 2019, she would have to take another full RMD in 2019.

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Kevin M
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Re: RMD Two in One Year

Post by Kevin M » Sat Feb 11, 2017 1:50 pm

Financial advisor has the right idea but wrong years:
The first year following the year you reach age 70½ you will generally have two required distribution dates: an April 1 withdrawal (for the year you turn 70½), and an additional withdrawal by December 31 (for the year following the year you turn 70½). To avoid having both of these amounts included in your income for the same year, you can make your first withdrawal by December 31 of the year you turn 70½ instead of waiting until April 1 of the following year.
Source: Retirement Topics - Required Minimum Distributions (RMDs)

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btenny
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Re: RMD Two in One Year

Post by btenny » Sat Feb 11, 2017 2:33 pm

I am in the same boat. I turn 70 in the 4th quarter this year. I read that I have to take my first RMD in 2018 but I can wait until 2019. BUT if i wait until 2019 I also have to take my second RMD in 2019 as well. So two RMDs in one year if I wait. Plus I will pay bigger taxes if I wait.

I also read that if I take a IRA withdrawal this year in 2017 it does not apply to my RMDs. So I still have to take a RMD next year.

Correct?

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Kevin M
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Re: RMD Two in One Year

Post by Kevin M » Sat Feb 11, 2017 2:38 pm

btenny wrote:I am in the same boat. I turn 70 in the 4th quarter this year. I read that I have to take my first RMD in 2018 but I can wait until 2019. BUT if i wait until 2019 I also have to take my second RMD in 2019 as well. So two RMDs in one year if I wait. Plus I will pay bigger taxes if I wait.

I also read that if I take a IRA withdrawal this year in 2017 it does not apply to my RMDs. So I still have to take a RMD next year.

Correct?
Yes, this all sounds consistent with what I quoted from the IRS publication.

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sport
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Re: RMD Two in One Year

Post by sport » Sat Feb 11, 2017 3:15 pm

btenny wrote:I am in the same boat. I turn 70 in the 4th quarter this year. I read that I have to take my first RMD in 2018 but I can wait until 2019. BUT if i wait until 2019 I also have to take my second RMD in 2019 as well. So two RMDs in one year if I wait. Plus I will pay bigger taxes if I wait.

I also read that if I take a IRA withdrawal this year in 2017 it does not apply to my RMDs. So I still have to take a RMD next year.

Correct?
Yes this is all correct. You should also be aware that if you want to make any QCDs, you must be at least 70.5 years old. So, although you can make RMD withdrawals any time during 2018, you must have passed your "half birthday" before you can make a QCD.

Gill
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Re: RMD Two in One Year

Post by Gill » Sat Feb 11, 2017 3:32 pm

Bigfish wrote:My wife turns 70 on September 15th of this year. A friend who is a financial adviser told me she would be wise to take her first RMD after her birthday this year. Otherwise she would have to take two distributions in 2018. One after she turned 70 and 1/2 (March 2018) and then a second one after she turns 71 which would be in September of 2018. Is this correct?
Thanks
BF
An additional suggestion might be to not take any financial advice from this person. :happy
Gill

The Wizard
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Re: RMD Two in One Year

Post by The Wizard » Sat Feb 11, 2017 3:33 pm

Also, RMDs deal with calendar years.
So if you turn 70.5 in November, 2018, then the clock starts ticking for RMD #1 on January 1, 2018.
In particular, you can't legally do any Roth conversions in 2018 until you complete that RMD...
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celia
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Re: RMD Two in One Year

Post by celia » Sat Feb 11, 2017 3:46 pm

btenny wrote:I am in the same boat. I turn 70 in the 4th quarter this year. I read that I have to take my first RMD in 2018 but I can wait until 2019. BUT if i wait until 2019 I also have to take my second RMD in 2019 as well. So two RMDs in one year if I wait. Plus I will pay bigger taxes if I wait.

I also read that if I take a IRA withdrawal this year in 2017 it does not apply to my RMDs. So I still have to take a RMD next year.

Correct?
Even if you take two RMDs in 2019, you may or may not have to pay bigger taxes. If you are referring to the tax rate being higher, you are probably thinking of threads you've read that warn that it may push you into a higher tax bracket. But this is not always true. It depends on your own personal tax return. To see what it would do to you (and assuming your martial status and income remains the same as last year), look at your Taxable Income (line 43) on your 2016 tax return. Suppose you add your RMD (or two of them) to that amount. Does that push you into the next tax bracket?
https://taxfoundation.org/2017-tax-brackets/

You can also take an "RMD" this year, but it is not an RMD since it is not required. But you could convert it, or any amount, to Roth (if you don't need it for living expenses) for the same taxes as if you put it in taxable. In fact, this is the last year you can do Roth conversions without having to first take an RMD.

Roth conversions will lower the amount in your TIRA. Thus, your future RMDs will be lower since the year-end balance in the account will be lower.
Last edited by celia on Sat Feb 11, 2017 3:53 pm, edited 1 time in total.
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.

JW-Retired
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Re: RMD Two in One Year

Post by JW-Retired » Sat Feb 11, 2017 3:52 pm

Gill wrote:
Bigfish wrote:My wife turns 70 on September 15th of this year. A friend who is a financial adviser told me she would be wise to take her first RMD after her birthday this year. Otherwise she would have to take two distributions in 2018. One after she turned 70 and 1/2 (March 2018) and then a second one after she turns 71 which would be in September of 2018. Is this correct?
Thanks
BF
An additional suggestion might be to not take any financial advice from this person. :happy
Gill
BF,
I would add kudos for being very careful of the FA advice by checking here. :beer

In addition, there is an official IRS worksheet for when to take RMDs and how much they need to be. You might work through it to verify our advice for yourself.
https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf
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The Wizard
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Re: RMD Two in One Year

Post by The Wizard » Sat Feb 11, 2017 3:54 pm

Many people are, or should be, already withdrawing money from their tIRA or 401k to live on in retirement, in accordance with the 4% SWR rule of thumb.
Those folks will have less of a hiccup at age 70.5...
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ruahoo2
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Re: RMD Two in One Year

Post by ruahoo2 » Sat Feb 11, 2017 6:09 pm

I would like to make this answer a little less confusing and direct to the point.
If you were have a birthday between JAN. 1 and June 30 you should take your RMD in that year.
If you have a birthday between July 1 and Dec. 31 you can wait till the following year.
Make sense ?

bill88
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Re: RMD Two in One Year

Post by bill88 » Tue Feb 13, 2018 1:59 pm

Similar situation. FWIW, here's our query to our cpa, and her reply:

"RMD question -- I turn 70.5 in 2019.
[wife] turns 70.5 THIS year. (her RMD for 2018, if she takes it, is $31.4k)
She can wait to take her first distribution in 2019, but then she would take TWO distributions in 2019.
(And in 2019, I have MY first RMD, unless I double up the following year -- 2020.)

I 'THINK' it makes sense for her to take her first RMD THIS year, instead of doubling up next year.

Does that make sense to you?
And does my RMD 'logic' still make sense if we wind up selling this house and buying another one, in 2018?"

cpa's reply:
"...agree on the RMD—assuming similar income in 2018/2019 as in prior years. We should review again once your 2017 return is completed."

In our case, I'm self employed, trying to segue from full to part-ownership of my (very small :-) business. No pension except Social Security, and a very high percentage of our investments are in non-Roth IRAs. But YMMV; everyone had different factors.
Bill | | (Formerly bill99)

Alan S.
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Re: RMD Two in One Year

Post by Alan S. » Tue Feb 13, 2018 4:40 pm

Selling the house would not make a difference unless it would trigger a new mortgage and prop taxes that would result in itemizing or much higher itemized deductions than you have now.

For most people, taking the first RMD in the first RMD year will be best since it avoids any double RMD years. However, there are exceptions that usually take some serious number crunching to identify. Analysis requires a full comparison of taxable income for the related years, which in your case would be 3 years because her first RMD year is two years prior to your second RMD year.

Most CPAs would likely only identify obvious triggers such as known large deductions, windfall like an inheritance or similar on the income side, etc. If you want to keep your options open, the best time to look at this situation in detail is early December of this year in terms of determining if your wife will take part of all of her 2018 RMD that month.

Not tax related, but if you are selling and buying a new home, you might actually need the RMD money sooner rather than later.

sport
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Re: RMD Two in One Year

Post by sport » Tue Feb 13, 2018 4:44 pm

It should also be understood that if the first two RMDs are taken in the same year, the second RMD will be larger than if they were taken in separate years. The reason for this is that an RMD amount is based on the December 31 balance of the previous year. If you defer the RMD, your 12/31 balance will be larger.

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Epsilon Delta
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Re: RMD Two in One Year

Post by Epsilon Delta » Tue Feb 13, 2018 5:34 pm

Selling the house could result in taxable capital gains in 2018, which could favor avoiding other income in 2018. Given the home sale exclusion It's not likely, but it is possible.

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