RMD will turn 70 in Nov. 2018

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SeaShelleys
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RMD will turn 70 in Nov. 2018

Post by SeaShelleys » Mon Sep 10, 2018 10:27 pm

I'm a little confused about the timing of my first and second RMDs. My birthday is in Nov. so I will turn 70 1/2 in May 2019. Is my first RMD to be taken after May 2019, and should it be taken in 2019 or 2020? Also, I turn 71 in 2019, so is my second RMD also to be taken in 2019 or 2020? Thank you.

PFInterest
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Re: RMD will turn 70 in Nov. 2018

Post by PFInterest » Tue Sep 11, 2018 6:56 am

Generally, April 1 following the later of the calendar year in which you reach age 70½.
so your first RMD needs to be taken then by April 1, 2020.
and yes, you would also have to take 2020s by Dec 31st (so 2 in 1 year if you wanted).

pkcrafter
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Re: RMD will turn 70 in Nov. 2018

Post by pkcrafter » Tue Sep 11, 2018 8:28 am

Shelly, you won't turn 70-1/2 until 2019 so that is the year for first distribution. However, in the first year, you have the option of waiting until up to April 1 of 2020 to make the first distribution. If you do that then you have to take two distributions in 2020 and that means a lot more money withdrawn in one year and it could push you into a higher tax bracket, so I wouldn't recommend it.

If you make your first withdrawal in 2019, the withdrawal amount will be based on the account value as of Dec 31, 2018.


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

tomd37
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Re: RMD will turn 70 in Nov. 2018

Post by tomd37 » Tue Sep 11, 2018 8:36 am

SeaShelleys - Just remember that if you delay the first RMD until the second year you will have two distributions to report on your tax return for the second year. That could result, dependent on your particular financial situation, in more of your Social Security being taxable than normally would be. I see this quite often in the AARP Foundation Tax Counseling for the Elderly (TCE or Tax-Aide) free tax preparation program in which I volunteer.
Tom D.

The Wizard
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Re: RMD will turn 70 in Nov. 2018

Post by The Wizard » Tue Sep 11, 2018 8:43 am

SeaShelleys wrote:
Mon Sep 10, 2018 10:27 pm
...My birthday is in Nov. so I will turn 70 1/2 in May 2019. Is my first RMD to be taken after May 2019...
Note that RMDs go by whole calendar years for the most part.
So you can take part or all of your first RMD starting in January, 2019. You don't have to wait until your 70-1/2 date.

My plan is to take equal monthly withdrawals for my RMD starting in January of my first RMD year (2020 for me).

About the only reason one would want to delay their first RMD into the following calendar year would be if they had substantial other income that first year that would not be there in subsequent years...
Attempted new signature...

Spirit Rider
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Re: RMD will turn 70 in Nov. 2018

Post by Spirit Rider » Tue Sep 11, 2018 8:45 am

If you turn 70 1/2 in 2019, you have to take an RMD for that year, but you have until 4/1/2020 to take that RMD. You can take that RMD anytime from 1/1/2019 - 4/1/2020. An RMD is taxed in the year it is taken.

After the 1st year, RMDs must be taken by 12/31. If you take 2019's RMD from 1/1/2020 - 4/1/2020. You will still have to take 2020's RMD by 12/31/2020 and they will both be taxed in 2020. This may or may not be beneficial.

RMDs are considered to come from the first distribution(s) taken. If you are thinking about rolling over a qualified plan to an IRA. You should do it before the end of this year. If not you will first have to take the RMD before the rollover. If you fail to do so, RMDs are not rollover eligible and will be considered an excess IRA contribution.

If you want to make a QCD, it can only come from an IRA and only after you actually turn 70 1/2. If you want it to come from an RMD, from above it must be the first distribution of the year.

Based on all of the above, there can be some tricky timing the year before, of and after you turn 70 1/2. Depending on the choices you may or may not want to take. Now is the time to decide and plan.

Some considerations:
  • If you want to rollover a qualified plan, you should do it before the end of this year.
  • If you want to do a QCD the first year and need distributions to live on before you can do the QCD. You should take them before the end of this year.
  • If you don't need the RMD in 2019, you should determine if there is a tax benefit/harm to taking it in 2020 by 4/1.

Nowizard
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Re: RMD will turn 70 in Nov. 2018

Post by Nowizard » Tue Sep 11, 2018 9:15 am

You can also take, I believe, a partial distribution in 2019 and then complete in 2020 along with the 2020 distribution if that is advantageous for any reason. I would check that to be certain, however.

Tim

Spirit Rider
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Re: RMD will turn 70 in Nov. 2018

Post by Spirit Rider » Tue Sep 11, 2018 9:42 am

Nowizard wrote:
Tue Sep 11, 2018 9:15 am
You can also take, I believe, a partial distribution in 2019 and then complete in 2020 along with the 2020 distribution if that is advantageous for any reason. I would check that to be certain, however.
You are correct. The 1st year RMD can be split over the two years 100%/0%, 0%/100% or anywhere in between.

kaneohe
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Re: RMD will turn 70 in Nov. 2018

Post by kaneohe » Tue Sep 11, 2018 10:20 am

Spirit Rider wrote:
Tue Sep 11, 2018 8:45 am
.....................................................
RMDs are considered to come from the first distribution(s) taken. ..............................

If you want to make a QCD, it can only come from an IRA and only after you actually turn 70 1/2. If you want it to come from an RMD, from above it must be the first distribution of the year.

...................................................
just to clarify...........the QCD(s) don't necessarily have to come from the first distribution of the yr, but they should be taken within the RMD amount to minimize IRA withdrawals. Also re-emphasize what Spirit Rider said....distribution of QCD must be AFTER you actually turn 20.5 y.o.
Ex: RMD is 15K.
1)You take 10K QCD and then 5K additional withdrawals. You have satisfied the RMD and withdrawn 15K total.
2)You take 5K withdrawal and then 10K QCD. You have satisfied the RMD and withdrawn 15K total.
3) You take 10K withdrawal and then 10K QCD. You have satisfied the RMD and the QCD but have withdrawn 20K total which is non-optimum compared to 1) or 2) above.
Last edited by kaneohe on Tue Sep 11, 2018 10:36 am, edited 1 time in total.

sport
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Re: RMD will turn 70 in Nov. 2018

Post by sport » Tue Sep 11, 2018 10:24 am

Spirit Rider wrote:
Tue Sep 11, 2018 8:45 am
If you want to make a QCD, it can only come from an IRA and only after you actually turn 70 1/2. If you want it to come from an RMD, from above it must be the first distribution of the year.
It is correct that you must actually be 70.5 to make a QCD. However, if you want it to come from your RMD, you must take it before you have completed your RMD. It does not have to be your first RMD withdrawal.
Example: 10K RMD, 70.5 in May.
You could take 1K in Jan, Feb, Mar, and April, and the first part of May. You would still have 5K left to take. You could then make QCDs for any or all of your remaining RMD any time during the year, up to April 1 of the following year.
In the following year, you can make QCDs for any part of your RMD, if you make them before the RMD is completed.

OhioGozaimas
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Re: RMD will turn 70 in Nov. 2018

Post by OhioGozaimas » Tue Sep 11, 2018 10:32 am

Income tax withheld from IRA distributions can reduce/eliminate the need to make estimated tax payments. I take my RMD distribution late in the year, withhold (federal) tax for the entire year, and don't make estimated federal payments for the first three quarters. (You can also withhold state taxes for certain states.)

RMDs are easy once you have done one (or two). I keep a spreadsheet showing my RMD computations from year to year, and what next year's "factor" will be...

Good luck!
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pkcrafter
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Re: RMD will turn 70 in Nov. 2018

Post by pkcrafter » Tue Sep 11, 2018 10:42 am

OhioGozaimas wrote:
Tue Sep 11, 2018 10:32 am
Income tax withheld from IRA distributions can reduce/eliminate the need to make estimated tax payments. I take my RMD distribution late in the year, withhold (federal) tax for the entire year, and don't make estimated federal payments for the first three quarters. (You can also withhold state taxes for certain states.)

RMDs are easy once you have done one (or two). I keep a spreadsheet showing my RMD computations from year to year, and what next year's "factor" will be...

Good luck!
Yes, I recommend this too. Much better than doing quarterly taxes.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

kaneohe
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Re: RMD will turn 70 in Nov. 2018

Post by kaneohe » Tue Sep 11, 2018 10:57 am

pkcrafter wrote:
Tue Sep 11, 2018 10:42 am
OhioGozaimas wrote:
Tue Sep 11, 2018 10:32 am
Income tax withheld from IRA distributions can reduce/eliminate the need to make estimated tax payments. I take my RMD distribution late in the year, withhold (federal) tax for the entire year, and don't make estimated federal payments for the first three quarters. (You can also withhold state taxes for certain states.)

RMDs are easy once you have done one (or two). I keep a spreadsheet showing my RMD computations from year to year, and what next year's "factor" will be...

Good luck!
Yes, I recommend this too. Much better than doing quarterly taxes.

Paul
Just curious what % of your RMD you are withholding.........I've read suggestions that you take the RMD late in the
yr and w/h all of it. Wondering if that looks a bit weird to IRS from the 1099R that they see. Understand that w/h
is treated as being paid evenly during the yr. but still................I guess they can't tell from the 1099R the timing late in the yr. but they might get curious?

sport
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Re: RMD will turn 70 in Nov. 2018

Post by sport » Tue Sep 11, 2018 11:02 am

There is no problem having taxes withheld late in the year. Near the end of the year, I look at the amount I paid in taxes the previous year (safe harbor rules), subtract any withholding made elsewhere, and have that much withheld from RMD. I then finish taking the rest of the RMD before the end of the year.

22twain
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Re: RMD will turn 70 in Nov. 2018

Post by 22twain » Tue Sep 11, 2018 12:02 pm

To be more specific, as I understand it:
kaneohe wrote:
Tue Sep 11, 2018 10:20 am
Ex: RMD is 15K.
1)You take 10K QCD and then 5K additional withdrawals. You have satisfied the RMD and withdrawn 15K total.
2)You take 5K withdrawal and then 10K QCD. You have satisfied the RMD and withdrawn 15K total.
In both of these cases you pay tax on 5K.
3) You take 10K withdrawal and then 10K QCD. You have satisfied the RMD and the QCD but have withdrawn 20K total which is non-optimum compared to 1) or 2) above.
In this case you pay tax on 10K.

In each case there's no tax on the 10K QCD. In cases 1 and 2, all of the QCD overlaps with the RMD, so it eliminates tax on 10K of the RMD, leaving you to pay tax on 5K (the last 5K of the RMD in case 1, the first 5K in case 2). In case 3, only 5K of the QCD overlaps with the RMD, so it eliminates tax only on the last 5K of the RMD, leaving you to pay tax on the first 10K.
My investing princiPLEs do not include absolutely preserving princiPAL.

sport
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Re: RMD will turn 70 in Nov. 2018

Post by sport » Tue Sep 11, 2018 12:32 pm

That is correct.

minskbelarus47
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Re: RMD will turn 70 in Nov. 2018

Post by minskbelarus47 » Tue Sep 11, 2018 2:35 pm

I think you should look at some other implications of your RMD. Here is some info I have consolidated:

It may affect your federal taxes, state taxes, medicare premiums, and hair loss.

2018 Standard Deduction and Personal Exemption Filing Status Deduction Amount
Single $12,000
Married Filing Jointly $24,000 + $2600 (1300x2) over 65 deduction, $26,600
Head of Household $18,000


Married Filing Jointly 2018 Tax Brackets
Taxable Income Tax Bracket:
$0-$19,050 10%
$19,051-$77,400 12%
$77,401-$165,000 22%
$165,001-$315,000 24%
$315,001-$400,000 32%
$400,001-$600,000 35%
$600,001+ 37%

Medicare Part B

If your yearly income in 2016 (for what you pay in 2018) was:
You pay each month (in 2018)
File individual tax return File joint tax return You pay premiums of
$85,000 or less $170,000 or less $134
above $85,000 up to $107,000 above $170,000 up to $214,000 $187.50
above $107,000 up to $133,500 above $214,000 up to $267,000 $267.90
above $133,500 up to $160,000 above $267,000 up to $320,000 $348.30
above $160,000 above $320,000 $428.60


Qualified Charitable Distribution

Using a QCD is a tax-savvy strategy that allows you to transfer up to $100,000 per year from your IRA directly to a qualifed charity. It is only available to IRAs and individuals who have reached RMD age (70.5). Any amount processed as a QCD counts toward your RMD requirement and reduces the taxable amount of your IRA distribution. This lowers both your adjusted gross income and taxable income, resulting in a lower overall tax liability. So, if our 70-year-old couple, who have an annual RMD between the two of them of $24,000, can instead direct $10,000 of it to charity as a QCD, it will reduce their taxable income by $10,000 and they still get to claim the same $26,550 ($26,600) standard deduction. In this case, if the couple is in the new 24% tax bracket, by using this strategy, they would have saved $2,400 in federal taxes alone — and potentially more in state tax savings. As you can see, there is good reason to perform a QCD if you plan to take the standard deduction in 2018, which is why this strategy will likely become commonplace in 2018.

Who said this is easy???? Sorry....columns never work in these

Spirit Rider
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Re: RMD will turn 70 in Nov. 2018

Post by Spirit Rider » Tue Sep 11, 2018 2:36 pm

22twain wrote:
Tue Sep 11, 2018 12:02 pm
To be more specific, as I understand it:
kaneohe wrote:
Tue Sep 11, 2018 10:20 am
Ex: RMD is 15K.
1)You take 10K QCD and then 5K additional withdrawals. You have satisfied the RMD and withdrawn 15K total.
2)You take 5K withdrawal and then 10K QCD. You have satisfied the RMD and withdrawn 15K total.
In both of these cases you pay tax on 5K.
3) You take 10K withdrawal and then 10K QCD. You have satisfied the RMD and the QCD but have withdrawn 20K total which is non-optimum compared to 1) or 2) above.
In this case you pay tax on 10K.

In each case there's no tax on the 10K QCD. In cases 1 and 2, all of the QCD overlaps with the RMD, so it eliminates tax on 10K of the RMD, leaving you to pay tax on 5K (the last 5K of the RMD in case 1, the first 5K in case 2). In case 3, only 5K of the QCD overlaps with the RMD, so it eliminates tax only on the last 5K of the RMD, leaving you to pay tax on the first 10K.
In all of these cases you are both missing the whole purpose of QCDs, which is to minimize your AGI when making charitable donations. Also, depending on your other deductions, your taxation is quite possibly not the same with the new higher standard deductions.

Effect of $15K RMD, $15K charitable distribution, MFJ and itemizable deductions <= $14K:
  • $10K QCD, $$5K distribution: AGI $10K less, taxable income $10K less,
  • $$5K QCD, $10K distribution: AGI $$5K less, taxable income $$5K less
  • $10K QCD, $10K distribution: AGI $10K less, taxable income $10K less
  • $15K QCD, $$0K distribution: AGI $15K less, taxable income $15K less
Even if you have more than enough deductions to itemize, there are many potential valuable benefits of a lower AGI. Lower SS income taxation, AGI phase out of various income tax deductions/credits, lower Medicare Part B/D premiums due to IRMAA, state/local age/agi income tax deductions, local age/agi property tax deductions, etc...

dewey
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Re: RMD will turn 70 in Nov. 2018

Post by dewey » Tue Sep 11, 2018 2:43 pm

I turn 70 and 1/2 on December 28, 2019. But I won't know the amount my RMD is based on until Dec. 31, correct? Which means I can't make a payment until January 2020 at the earliest. It sounds like I have to make two payments in 2020? Every year the RMD amount is determined on December 31st I thought. I'm puzzled.
“The only freedom that is of enduring importance is freedom of intelligence…”

sport
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Re: RMD will turn 70 in Nov. 2018

Post by sport » Tue Sep 11, 2018 3:01 pm

dewey wrote:
Tue Sep 11, 2018 2:43 pm
I turn 70 and 1/2 on December 28, 2019. But I won't know the amount my RMD is based on until Dec. 31, correct? Which means I can't make a payment until January 2020 at the earliest. It sounds like I have to make two payments in 2020? Every year the RMD amount is determined on December 31st I thought. I'm puzzled.
That is not correct. If you turn 70.5 in Dec 19, your RMD is determined based on your IRA balance(s) on 12/31/18. You will be able to make RMD withdrawals any time during 2019. RMDs for each year are based on your 12/31 balance of the PREVIOUS year.
If you want to make any QCDs in 2019, you will have only a few days in which to do that. This problem is for the first year only.

dewey
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Re: RMD will turn 70 in Nov. 2018

Post by dewey » Tue Sep 11, 2018 5:45 pm

sport wrote:
Tue Sep 11, 2018 3:01 pm
dewey wrote:
Tue Sep 11, 2018 2:43 pm
I turn 70 and 1/2 on December 28, 2019. But I won't know the amount my RMD is based on until Dec. 31, correct? Which means I can't make a payment until January 2020 at the earliest. It sounds like I have to make two payments in 2020? Every year the RMD amount is determined on December 31st I thought. I'm puzzled.
That is not correct. If you turn 70.5 in Dec 19, your RMD is determined based on your IRA balance(s) on 12/31/18. You will be able to make RMD withdrawals any time during 2019. RMDs for each year are based on your 12/31 balance of the PREVIOUS year.
If you want to make any QCDs in 2019, you will have only a few days in which to do that. This problem is for the first year only.
Thanks so much for this!! Made my day.
“The only freedom that is of enduring importance is freedom of intelligence…”

tomd37
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Re: RMD will turn 70 in Nov. 2018

Post by tomd37 » Tue Sep 11, 2018 6:13 pm

Dewey - Looking at a calendar for 2019 you have only two days on which you could complete a QCD for 2019; Monday and Tuesday, December 30th and 31st. I believe It could be done with close coordination with your investment company and I speak from experience with my investment company (Vanguard).
Tom D.

kaneohe
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Re: RMD will turn 70 in Nov. 2018

Post by kaneohe » Tue Sep 11, 2018 6:59 pm

kaneohe wrote:
Tue Sep 11, 2018 10:20 am
Spirit Rider wrote:
Tue Sep 11, 2018 8:45 am
.....................................................
RMDs are considered to come from the first distribution(s) taken. ..............................

If you want to make a QCD, it can only come from an IRA and only after you actually turn 70 1/2. If you want it to come from an RMD, from above it must be the first distribution of the year.

...................................................
just to clarify...........the QCD(s) don't necessarily have to come from the first distribution of the yr, but they should be taken within the RMD amount to minimize IRA withdrawals.
This was the only point I was trying to make.............QCD doesn't have to be the first distribution of the year as long it is taken before the RMD amount is withdrawn......and as you pointed out the QCD must be withdrawn after 70.5 .

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