Opinion's: Best time to withdraw RMD's when required to do so.

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Billyboy
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Opinion's: Best time to withdraw RMD's when required to do so.

Post by Billyboy » Wed Sep 12, 2018 1:17 am

Opinions wanted please. At the beginning of 2018 I had to withdraw my RMD's by Dec. 31, 2018 in the amount of $96,358.63. To date, I've taken withdrawals of $24,121.94. I have the remainder of $72,236.69 still to be withdrawn. I'd appreciate all those that might see this post to kindly give me their answer as to what they do or probably will do when they reach the age in which they are required to take RMD withdrawals along the reasons why they feel as they do about it. I've reached the age of almost 75. Thank you.

mhalley
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by mhalley » Wed Sep 12, 2018 3:12 am

It doesn't matter that much, but what I plan to do in six years us to take my rmds in late November. At that point I wiill have a good idea of my tax burden and will withhold taxes accordingly, allowing me to skip estimated tax payments. It will also allow money to compound tax free longer. Plus I still have a month to ensure that all goes well.

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dratkinson
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by dratkinson » Wed Sep 12, 2018 3:22 am

Not my situation, but....

If you don't need the RMDs to live on, have seen others suggest taking the RMD for this year (the requirement), and then convert some (but not enough to enter next tax bracket) into a Roth IRA. The idea being that the conversion will lessen your 31 Dec tax-deferred balance (401k, IRA,...), so your next RMD will be also be less.

Lather, rinse, repeat until your tax-deferred balance is completely converted.

Since the conversion each year is converting future tax-deferred investment growth into future tax-free investment growth, the earlier in the year the conversion happens, the better.
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jclear
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by jclear » Wed Sep 12, 2018 3:50 am

When I get to RMD, I expect to be worried about having things done properly, even if I’m hospitalized or whatever. So I plan to complete the RMD in the first half of the year, and then late in the year make any other distribution or Roth conversion in an amount to perfect my taxes.

Ron Scott
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by Ron Scott » Wed Sep 12, 2018 3:57 am

mhalley wrote:
Wed Sep 12, 2018 3:12 am
It doesn't matter that much, but what I plan to do in six years us to take my rmds in late November. At that point I wiill have a good idea of my tax burden and will withhold taxes accordingly, allowing me to skip estimated tax payments. It will also allow money to compound tax free longer. Plus I still have a month to ensure that all goes well.
Agree completely and for the reasons stated. Thanksgiving works.

furwut
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by furwut » Wed Sep 12, 2018 4:18 am

The penalty for under withdrawal is severe. I suggest enrolling in a RMD service with your provider.

I have an inherited IRA for which I must take a RMD. The amount is small so I have the service distribute it annually in December.

But once I begin taking RMDs from my own accounts and, needing the money for current expenses, I will set it up for monthly disbursements to my checking account.

If you don’t need some or all of the money immediately you can reinvest it in a taxable account.

It’s not discussed enough in these forums but there is value in keeping our financial arrangements simple - especially as we reach certain ages.

TwstdSista
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by TwstdSista » Wed Sep 12, 2018 4:23 am

I've always thought I'd take them early in the year, just to make things easier for my heirs should I pass. (I'd hate to create a mess by dying in late November and them not even having the time to figure out my RMDs before the year ends. I like them too much!)

furwut
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by furwut » Wed Sep 12, 2018 4:28 am

Taxes. I pay estimated taxes based on the previous year under safe harbor rules.

Unless there is a sudden spike in income you shouldn’t face a surprise come April.

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Steelersfan
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by Steelersfan » Wed Sep 12, 2018 5:36 am

This thread has a lot of discussion about when people take RMD's.

viewtopic.php?f=1&t=256848

Ron Scott
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by Ron Scott » Wed Sep 12, 2018 6:47 am

furwut wrote:
Wed Sep 12, 2018 4:18 am
But once I begin taking RMDs from my own accounts and, needing the money for current expenses, I will set it up for monthly disbursements to my checking account.

If you don’t need some or all of the money immediately you can reinvest it in a taxable account.
To amplify, cashing out RMDs or reinvesting them into a different vehicle is fine, but you can also often keep the same investment, transfer it to a taxable account and pay your taxes. Holders of old 30 bonds still paying 7% might not want to sell outright..

RadAudit
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by RadAudit » Wed Sep 12, 2018 7:25 am

I was looking over a prior post in the thread linked above.

Upon reflection, what I really do is I take the RMD in Dec. That's on automatic via VG. From that RMD, federal taxes are withheld for that year. The remainder of the RMD is transferred to a MM in a taxable account. In early Jan, I compare the amount in the MM with the SWR / budget for the coming year and adjust the portfolio asset allocation to suit - either invest the difference or withdraw from assets in the taxable account and / or rearrange assets inside the IRA.

State taxes are withheld monthly from a small pension.

Additional living expenses are withdrawn from the MM on an as needed basis throughout the year. And minor adds / subtracts are made after tax filing, if needed or I get around to it.


Why? This is all probably a big rationalization. The ballet of the books isn't that complicated, really. So, no great strain there. The whole process of calculating money moves and realigning the asset allocation can be done in a half hour. (And, I'm not that good at pushing numbers around a page.) Essentially, living off SS and a small pension is just mental gymnastics that helps us maintain a moderate lifestyle. Also, I believe that in up markets, taking RMDs in Dec. allows the money to work a little longer. And, finally, the US can wait on the getting the tax money, AFAIC.
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midareff
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by midareff » Wed Sep 12, 2018 7:31 am

I simply withdraw (automatically) 1/12 of the required RMD monthly in the form of a transfer from VG to bank. It's just another source of income besides SS, pension, Roth, dividends from taxable and so forth.

carolinaman
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by carolinaman » Wed Sep 12, 2018 7:48 am

I do late in the calendar year when my tax situation is more clear. This way I can withhold proper amount to avoid under withholding penalties by IRS.

The Wizard
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by The Wizard » Wed Sep 12, 2018 8:45 am

I've been withdrawing $3000/month from tax-deferred since I retired at age 63. This is instead of SS as I delay that until age 70.

I turn 70-1/2 in 2020 and will adjust that $3000/month to just cover my RMD, probably a lesser amount depending on what Mr. Market does.

In a twist on fungibility, I plan to live on my RMDs and reinvest my SS...
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The Wizard
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by The Wizard » Wed Sep 12, 2018 8:46 am

midareff wrote:
Wed Sep 12, 2018 7:31 am
I simply withdraw (automatically) 1/12 of the required RMD monthly in the form of a transfer from VG to bank. It's just another source of income besides SS, pension, Roth, dividends from taxable and so forth.
This sounds like a really excellent way to do it...
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ruralavalon
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by ruralavalon » Wed Sep 12, 2018 8:50 am

Billyboy wrote:
Wed Sep 12, 2018 1:17 am
Opinions wanted please. At the beginning of 2018 I had to withdraw my RMD's by Dec. 31, 2018 in the amount of $96,358.63. To date, I've taken withdrawals of $24,121.94. I have the remainder of $72,236.69 still to be withdrawn. I'd appreciate all those that might see this post to kindly give me their answer as to what they do or probably will do when they reach the age in which they are required to take RMD withdrawals along the reasons why they feel as they do about it. I've reached the age of almost 75. Thank you.
Age 73, no pension. We take my Required Minimum Distribution monthly, automatically transferred to our joint checking account. The RMDs plus Social Security in total are a little more than our monthly living expenses, so that works nicely for us.
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Dottie57
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by Dottie57 » Wed Sep 12, 2018 9:12 am

TwstdSista wrote:
Wed Sep 12, 2018 4:23 am
I've always thought I'd take them early in the year, just to make things easier for my heirs should I pass. (I'd hate to create a mess by dying in late November and them not even having the time to figure out my RMDs before the year ends. I like them too much!)
Very good idea!

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Watty
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by Watty » Wed Sep 12, 2018 9:30 am

There is no consensus but to me there are a lot of downsides to not taking it as one distribution early in the year;

1) If you do not take the RMD in the year you die it can be a hassle for your heirs to take the RMD and if they are are not financially savvy they may not even realise that they have to take the RMD.

2) If you have been taking a monthly distribution it may be confusing for your heirs to figure out how much of the RMD you had taken when you died. I would take it all at one time.

3) If you wait until late in the year there is also a chance that the RMD will not actually happen since you might be in a hospital or traveling, or just forget to do it especially when you are older. Even if you have it set up to automatically be done there can be snafus with that, like if you do not have enough money in your core money market account for the RMD. If there is a problem early in the year there is lots of time to get any snafus fixed.

mpnret
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by mpnret » Wed Sep 12, 2018 10:34 am

I do one RMD late in the year with my entire tax due deducted from that. That way your money remains invested tax defered for the year plus you only make the one tax payment (deducted from RMD) at the end of the year. No estimated tax payments throughout the year or tax deducted from other income. Why pay tax earlier than you have to. For those who fear dying or other disasters before the end of the year set up the RMD in the beginning of the year to be paid in December. Also it doesn't take long to prepare a document for your heirs explaining what needs to be done.

Lynette
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by Lynette » Wed Sep 12, 2018 10:39 am

Dottie57 wrote:
Wed Sep 12, 2018 9:12 am
TwstdSista wrote:
Wed Sep 12, 2018 4:23 am
I've always thought I'd take them early in the year, just to make things easier for my heirs should I pass. (I'd hate to create a mess by dying in late November and them not even having the time to figure out my RMDs before the year ends. I like them too much!)
Very good idea!
I do QCDs early in the year. Once that is settled, I take the remaining RMDs so I'm done by February. I have taxes withheld from the RMD, and separately from two pensions and SS.

Gill
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by Gill » Wed Sep 12, 2018 10:47 am

TwstdSista wrote:
Wed Sep 12, 2018 4:23 am
I've always thought I'd take them early in the year, just to make things easier for my heirs should I pass. (I'd hate to create a mess by dying in late November and them not even having the time to figure out my RMDs before the year ends. I like them too much!)
I switched to taking 100% in early January for this same reason.
Gill

sport
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by sport » Wed Sep 12, 2018 10:48 am

I want to be able to make QCDs throughout the year as some of them are not planned in advance. So, I make those QCDs and then withdraw the balance of the RMD late in the year. I have enough income tax withheld to meet the safe harbor rules at that time. QCDs are a wonderful tax break, and should not be ignored if you donate to qualified charities.

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Oak&Elm
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Re: Opinion's: Best time to withdraw RMD's when required to do so.

Post by Oak&Elm » Wed Sep 12, 2018 11:50 am

I've always thought I'd take them early in the year, just to make things easier for my heirs should I pass. (I'd hate to create a mess by dying in late November and them not even having the time to figure out my RMDs before the year ends. I like them too much!)
Planning to change my RMD date to January 10th for next year. Good reasoning

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