What did you do with your first RMD withdrawal money?

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The Wizard
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Re: What did you do with your first RMD withdrawal money?

Post by The Wizard » Sat Dec 09, 2017 1:04 pm

sport wrote:
Sat Dec 09, 2017 12:57 pm
SpringMan wrote:
Sat Dec 09, 2017 12:19 pm
plumberboy wrote:
Fri Dec 08, 2017 3:42 pm
After being fully retired for several years I decided to take a part time job with a food catering company to keep myself occupied. That qualifies me for a Roth IRA so part of my RMD pays state and federal taxes, part into a Roth and the rest into Vanguard personal account .
Not your situation but for others benefit, money converted from a traditional IRA to a Roth does not satisfy your RMD requirement. Of course moving the RMD to your taxable and using that money as a new contribution to a Roth is acceptable when you otherwise qualify for a Roth.
As I understand the rules, the first withdrawals from a TIRA must be used to satisfy RMD requirements. That money is not allowed to be used for Roth conversion (it can be used for QCDs). After the RMD has been met, Roth conversions may then be done.
Correct, but he's doing a Roth CONTRIBUTION, not a CONVERSION...
Attempted new signature...

Ron
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Re: What did you do with your first RMD withdrawal money?

Post by Ron » Sat Dec 09, 2017 2:03 pm

livesoft wrote:
Thu Dec 07, 2017 6:43 pm
praxis wrote:
Thu Dec 07, 2017 6:20 pm
Dale_G wrote:
Thu Dec 07, 2017 5:38 pm
The IRS gets paid first, the remainder goes to the taxable account. The IRS gets more than half :D

Dale
How do you figure it's half?
I will guess it's because Mr. G makes it so. He probably has plenty of other income, but withholds no taxes from the other income and has all his tax liability for all income withheld from his RMD. That's what I intend to do when I get there.
Same here.

We both will start drawing RMD's in 2018, with the primary use of the funds to pay taxes on our various sources of income, that don't have taxes paid at the time of monthly income. We'll be up to five separate income sources in 2018, when my age 70 SS begins, with no FIT paid.

However, that is nothing different than what we've been doing over many years; retirement income taxes have always been paid out of our TIRA holdings (including FIT on the TIRA withdrawals).

Anything left over after FIT? I'm sure we will have a use for the excess funds :twisted: ...

- Ron

newstreetnj
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Re: What did you do with your first RMD withdrawal money?

Post by newstreetnj » Sun Dec 10, 2017 7:27 pm

montanagirl wrote:
Thu Dec 07, 2017 10:06 am
When you get RMDs from Vanguard, can they go straight to a taxable account at VG, or do they need to come all the way "home" to your bank, and then be reinvested (for appearance's sake)?
V will put your $ into the taxable acct Bob

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Jimbo9911
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Re: What did you do with your first RMD withdrawal money?

Post by Jimbo9911 » Mon Dec 11, 2017 12:45 pm

livesoft wrote:
Thu Dec 07, 2017 10:30 am
I didn't read the study in the first quote, but here is the reference:
Poterba, Venti, and Wise "The Drawdown of Personal Retirement Assets" NBER Working Paper 16675 (January 2011)

As an aside, perhaps one of the reasons for Wellington and Wellesley to do so well is that no one ever withdraws any significant money from these funds ever.
Livesoft are you alluding to the idea that if most of my pretax investments are in Wellington that I should not withdraw gains from there for RMD's?
Jim

livesoft
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Re: What did you do with your first RMD withdrawal money?

Post by livesoft » Mon Dec 11, 2017 1:12 pm

No, I am not.
Wiki This signature message sponsored by sscritic: Learn to fish.

zengolf2011
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Re: What did you do with your first RMD withdrawal money?

Post by zengolf2011 » Tue Dec 12, 2017 1:25 pm

The overwhelming number of responders that reinvest RMDs reifies my faith in Bogleheads. I laud your high degree of financial responsibility. I choose to spend mine on luxuries, but may reinvest next year's since I don't have a burning desire for something new now. My main takeaway is that each of us has a unique situation and priorities. Many don't seem to need to spend RMDs, and many seem just to prefer not to.

Ron
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Re: What did you do with your first RMD withdrawal money?

Post by Ron » Tue Dec 12, 2017 3:05 pm

zengolf2011 wrote:
Tue Dec 12, 2017 1:25 pm
The overwhelming number of responders that reinvest RMDs reifies my faith in Bogleheads. I laud your high degree of financial responsibility. I choose to spend mine on luxuries, but may reinvest next year's since I don't have a burning desire for something new now. My main takeaway is that each of us has a unique situation and priorities. Many don't seem to need to spend RMDs, and many seem just to prefer not to.
OTOH, there are those that won't spend since they fear they will never have "enough"...

https://www.aarp.org/money/investing/in ... spend.html

- Ron

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celia
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Re: What did you do with your first RMD withdrawal money?

Post by celia » Tue Dec 12, 2017 3:47 pm

dbr wrote:
Thu Dec 07, 2017 9:58 am
I guess a person could ask how the size of the RMD in dollars compares to the size of withdrawals in a year. For me the answer is that in some years the RMD amount has exceeded total withdrawals and in other years it has been less.
Please explain the underlined section. Sometimes you withdraw less than the RMD? Then you must pay a penalty on the shortfall, or it is not really a RMD?

dbr wrote:
Thu Dec 07, 2017 3:59 pm
3. An RMD may impose a tax cost. The investor will have to withdraw money to pay the taxes.
Or you can pay the taxes from taxable or have it withheld from your income stream(s) [pension, SS].

dbr
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Re: What did you do with your first RMD withdrawal money?

Post by dbr » Tue Dec 12, 2017 5:55 pm

celia wrote:
Tue Dec 12, 2017 3:47 pm
dbr wrote:
Thu Dec 07, 2017 9:58 am
I guess a person could ask how the size of the RMD in dollars compares to the size of withdrawals in a year. For me the answer is that in some years the RMD amount has exceeded total withdrawals and in other years it has been less.
Please explain the underlined section. Sometimes you withdraw less than the RMD? Then you must pay a penalty on the shortfall, or it is not really a RMD?

dbr wrote:
Thu Dec 07, 2017 3:59 pm
3. An RMD may impose a tax cost. The investor will have to withdraw money to pay the taxes.
Or you can pay the taxes from taxable or have it withheld from your income stream(s) [pension, SS].
Withdrawal is the money you remove from your portfolio. RMD is a distribribution that moves money from one part of your portfolio to another. The reason for being so pedantic about this is to short circuit the possible confusion that things that move around in the portfolio like distributions of dividends, capital gains, and RMDs should not be confused with actually withdrawing and spending money. This is designed to remain clear about what is return to a portfolio, what is withdrawal from a portfolio, and what is changing asset location or asset allocation in a portfolio.

You are correct that you can meet the tax cost by paying for it from income sources rather than by withdrawing money from the portfolio to pay the tax. My comments were incomplete on that count.

zengolf2011
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Re: What did you do with your first RMD withdrawal money?

Post by zengolf2011 » Tue Dec 12, 2017 7:47 pm

Ron wrote:
Tue Dec 12, 2017 3:05 pm
zengolf2011 wrote:
Tue Dec 12, 2017 1:25 pm
The overwhelming number of responders that reinvest RMDs reifies my faith in Bogleheads. I laud your high degree of financial responsibility. I choose to spend mine on luxuries, but may reinvest next year's since I don't have a burning desire for something new now. My main takeaway is that each of us has a unique situation and priorities. Many don't seem to need to spend RMDs, and many seem just to prefer not to.
OTOH, there are those that won't spend since they fear they will never have "enough"...

https://www.aarp.org/money/investing/in ... spend.html

- Ron
Yes, Ron, I'm sure that's part of it for some. Knowing that I have separate accounts dedicated to specific purposes helps free me psychologically to spend my RMDs. I don't know if this would have the same effect for others. There is no such thing as absolute security. BTW, Mr. Bogle's book Enough is one of my favorites.

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munemaker
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Re: What did you do with your first RMD withdrawal money?

Post by munemaker » Tue Dec 12, 2017 8:01 pm

dbr wrote:
Tue Dec 12, 2017 5:55 pm

Withdrawal is the money you remove from your portfolio. RMD is a distribribution that moves money from one part of your portfolio to another.
Very well stated. Some people (original poster?) confuse withdrawal and distribution.

Ruger
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Re: What did you do with your first RMD withdrawal money?

Post by Ruger » Tue Dec 12, 2017 8:11 pm

Haven't started taking them yet, but my plan is to pay taxes, spend a good portion on travel, and then put the rest into my taxable accounts.

hudson
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Re: What did you do with your first RMD withdrawal money?

Post by hudson » Tue Dec 12, 2017 8:36 pm

joe8d wrote:
Thu Dec 07, 2017 8:40 pm
Reinvested in taxable account.
Me too.
My first RMD will be in January. I don't re-balance.

plumberboy
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Re: What did you do with your first RMD withdrawal money?

Post by plumberboy » Tue Dec 12, 2017 8:44 pm

The Wizard wrote:
Sat Dec 09, 2017 1:04 pm
sport wrote:
Sat Dec 09, 2017 12:57 pm
SpringMan wrote:
Sat Dec 09, 2017 12:19 pm
plumberboy wrote:
Fri Dec 08, 2017 3:42 pm
After being fully retired for several years I decided to take a part time job with a food catering company to keep myself occupied. That qualifies me for a Roth IRA so part of my RMD pays state and federal taxes, part into a Roth and the rest into Vanguard personal account .
Not your situation but for others benefit, money converted from a traditional IRA to a Roth does not satisfy your RMD requirement. Of course moving the RMD to your taxable and using that money as a new contribution to a Roth is acceptable when you otherwise qualify for a Roth.
As I understand the rules, the first withdrawals from a TIRA must be used to satisfy RMD requirements. That money is not allowed to be used for Roth conversion (it can be used for QCDs). After the RMD has been met, Roth conversions may then be done.
Correct, but he's doing a Roth CONTRIBUTION, not a CONVERSION...
The way I made my comment was sort of misleading. A Roth Ira was the only kind of IRA I qualified for after the age of 70 1/2. I had no Roth IRA prior to getting the part time job. The RMD from the TIRA is transferred directly into my Vanguard personal account and then the appropriate amount is transferred to the Roth account.The wages from the part time job are never deposited directly to the Vanguard personal account.

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SpringMan
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Re: What did you do with your first RMD withdrawal money?

Post by SpringMan » Tue Jan 23, 2018 3:41 pm

sport wrote:
Sat Dec 09, 2017 12:57 pm
SpringMan wrote:
Sat Dec 09, 2017 12:19 pm
plumberboy wrote:
Fri Dec 08, 2017 3:42 pm
After being fully retired for several years I decided to take a part time job with a food catering company to keep myself occupied. That qualifies me for a Roth IRA so part of my RMD pays state and federal taxes, part into a Roth and the rest into Vanguard personal account .
Not your situation but for others benefit, money converted from a traditional IRA to a Roth does not satisfy your RMD requirement. Of course moving the RMD to your taxable and using that money as a new contribution to a Roth is acceptable when you otherwise qualify for a Roth.
As I understand the rules, the first withdrawals from a TIRA must be used to satisfy RMD requirements. That money is not allowed to be used for Roth conversion (it can be used for QCDs). After the RMD has been met, Roth conversions may then be done.
Agreed.
Best Wishes, SpringMan

WhiteMaxima
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Re: What did you do with your first RMD withdrawal money?

Post by WhiteMaxima » Tue Jan 23, 2018 7:11 pm

Put into CD checking acount.

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Jazztonight
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Re: What did you do with your first RMD withdrawal money?

Post by Jazztonight » Tue Jan 23, 2018 10:32 pm

I took social security at 66. Now, several years later, I am receiving my RMD.

The combination gives me enough to live on without tapping other investments. I'm a lucky guy. 8-)
"What does not destroy me, makes me stronger." Nietzsche

dbr
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Re: What did you do with your first RMD withdrawal money?

Post by dbr » Wed Jan 24, 2018 9:35 am

Jazztonight wrote:
Tue Jan 23, 2018 10:32 pm
I took social security at 66. Now, several years later, I am receiving my RMD.

The combination gives me enough to live on without tapping other investments. I'm a lucky guy. 8-)
Yes, that should be a secure plan, just keeping in mind that spending RMD is tapping the investments that the RMD is taken from. Whether or not it makes sense to think of those investments and the "other" investments to not just be your investments I am less sure of.

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Doom&Gloom
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Re: What did you do with your first RMD withdrawal money?

Post by Doom&Gloom » Wed Jan 24, 2018 4:12 pm

Paid off a 0% rate balance transfer from a credit card, paid my HELOC almost to 0, and will probably squander most of the remainder.

:sharebeer

jdb
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Re: What did you do with your first RMD withdrawal money?

Post by jdb » Wed Jan 24, 2018 6:51 pm

Parthenon wrote:
Fri Dec 08, 2017 11:40 am
Turned the entire amount into a Qualified Charitable Distribution. Spread the money over about a dozen charities plus my church and school.

Ed
+1. Looking forward to working with spouse to designate the beneficiaries of the QCDs when turn 70.5 in August this year.

rick51
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Re: What did you do with your first RMD withdrawal money?

Post by rick51 » Thu Sep 06, 2018 8:55 am

This post has a little bit of age on it, but I wanted to follow up on one of the responders that mentioned putting their RMD in a 529 plan. I'm presuming this means that you can take your RMD then use the proceeds to fund a 529 to pay the tuition for a family member that maybe entering college thereby helping your grandchild as well as avoiding the deferred taxation that is now due on your RMD. Correct?

jerryk68
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Re: What did you do with your first RMD withdrawal money?

Post by jerryk68 » Thu Sep 06, 2018 9:21 am

For the last 5 years we have taken about double the required RDM to just under the $170k medicare part B limit where the premium now goes from $134 to $187.50. Most of those funds we give to charity, kids and 529 money for the grandkids. Never thought the market would be this good to us.

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