Modifying a RMD to account for QCDs

[RadAudit]

OK, before we get too far in to this, I'll freely admit it is all my fault anyway.

I've have been taking RMDs for sometime know. I've been taking QCDs for some time, too. And each year, I've called VG to adjust the annual RMD number to reflect the QCD impact and come up with a remaining RMD number. And that remaining RMD was transferred - minus taxes - to a taxable MM at a previously scheduled date. As I recall, the process was fairly straight forward (RMD - QCD = remaining RMD) and took a minimum amount of time and interaction with the account rep.

This year took about 1/2 an hour. As far as I could figure, the rep SEEMED to forced the algorithm to take the take the remaining RMD early and then set up next year's RMD in the account IAW my preset preferences - % withholding, date of schedule withdrawal, etc.

Couple of questions
1. Am I being too sensitive about this? (Old and cranky?)
2. Is there a simple way to do this myself w/o an extended conversation with the account rep? (Nothing against the rep. He seemed to be a personable enough. I'll assume he was competent at least until I get the confirmations tomorrow.)

[Gill]

First of all, you do know there is no RMD for 2020 so I'm not clear about the discussion of this year's transactions?

I'm not sure how to set this up to happen through Vanguard's automatic service. The way I do it personally is to budget my QCD's, withdraw the RMD less the QCD budget early in the year and then later in the year, when I have completed my QCD's, withdraw the balance of the RMD. I wouldn't want to depend on Vanguard's RMD service for this.
Gill

[sport]

I find it easier not to automate the RMDs. I just make the QCDs throughout the year, as I want to. I take the remainder of the RMD near the end of the year. I calculate how much I need to have withheld for taxes to meet the safe harbor. My safe harbor is the amount of tax I paid the previous year. So, I have that amount withheld from the RMD. Unfortunately, Vanguard will not withhold for my state income taxes, despite me asking for this every year. By not automating the RMDs, I have complete control over all the distributions.

[RadAudit]

you do know there is no RMD for 2020 so I'm not clear about the discussion of this year's transactions?

I use the remaining RMDs to take care of required annual federal taxes.

[cheese_breath]

I must not understand the question. Back in the day before I exhausted my tIRA, my account was set to automatically take the RMD on December 2nd. VG considered any QCD before then as part of my RMD, and when Dec 2 came they withdrew the rest.

[Gill]

you do know there is no RMD for 2020 so I'm not clear about the discussion of this year's transactions?

I use the remaining RMDs to take care of required annual federal taxes.

Are you taking a distribution even though not required? That's fine as long as you realize it's not necessary. I'd find another way to pay my taxes rather than realize additional income by an IRA withdrawal.
Gill

[RadAudit]

I'd find another way to pay my taxes rather than realize additional income by an IRA withdrawal.
Gill

Good point

[Alan S.]

I find it easier not to automate the RMDs. I just make the QCDs throughout the year, as I want to. I take the remainder of the RMD near the end of the year. I calculate how much I need to have withheld for taxes to meet the safe harbor. My safe harbor is the amount of tax I paid the previous year. So, I have that amount withheld from the RMD. Unfortunately, Vanguard will not withhold for my state income taxes, despite me asking for this every year. By not automating the RMDs, I have complete control over all the distributions.

+1!
Simpler is better and cutting out the middleman (VG) from the decision process eliminates a possible source of misunderstanding or miscommunication.

That is true of a normal year, but even more so now as we have seen the CARES Act upend the best laid plans. And we may not be done. Pressure is building for more relief bills from Congress which could include additional changes to RMD rules and possibly even QCDs. And we have all new RMD tables approved for 2022 RMDs. The IRS is still playing catch up with tax legislation and regulations that go back to 2017 as well as the Secure Act. The IRS has been slowed by Covid and they often leave little time for IRA custodian to reprogram their systems for these types of changes. CSRs cannot be trained fast enough to provide high quality answers to questions. So keep things simple if you can.

In general, that might include not starting the 2021 RMD process in the first quarter if you can wait. Acting early in the year resulted in considerable chaos this year, and 2021 could well be more of the same.

[Gill]

In general, that might include not starting the 2021 RMD process in the first quarter if you can wait. Acting early in the year resulted in considerable chaos this year, and 2021 could well be more of the same.

Excellent advice, Alan. I well remember the trauma of regretting my partial January RMD withdrawal until relief was finally received. I plan to follow your advice for 2021.
Gill

[RadAudit]

Back in the day before I exhausted my tIRA, my account was set to automatically take the RMD on December 2nd. VG considered any QCD before then as part of my RMD, and when Dec 2 came they withdrew the rest.

Good idea. Think I'll take the QCDs, and most of the rest of the remaining RMD, before too late in the year, and then let VG take the rest of the remaining RMD according to schedule.