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Old 03-14-2016, 12:52 PM   #21
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Originally Posted by Gotadimple View Post
Why is it mandatory? I have been withdrawing from my IRA since 2010 and have declined to have Schwab withhold anything.

- Rita
I don't see any reference to a mandatory 20% withholding on regular IRA withdrawals after retirement. I do see a 20% mandatory withholding on roll-overs that are paid directly to the account holder instead of being rolled over directly to another IRA custodian
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Old 03-14-2016, 01:43 PM   #22
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I believe that 401k's have the required 20% withholding on distributions.

Here is an article that talks about the required 20% WH on 401ks that does not exist for IRAs.

http://www.figuide.com/how-to-bypass...tribution.html

-gauss
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Old 03-14-2016, 02:47 PM   #23
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My husband has a retirement account at Fidelity. This is the beginning statement of the MRD (RMD) form.
Quote:
Use this form to request a Minimum Required Distribution (MRD) for the current, deferred, or a missed year from your 401(a), 401(k), 403(b), or 457(b) governmental employer plan. Do NOT use this form to request an MRD for the current year if your plan has arranged with Fidelity to automatically pay MRDs.
On the third page is a tax section which says:
Quote:
5. Tax Withholding
II
If you are a u.s. person but do NOT make a federal tax selection below, the IRS requires us to withhold federal taxes - we will withhold at the rate for a married person with 3 dependents. For non-resident aliens, the minimum federal mandatory withholding rate of 30% will apply, unless the prevailing tax treaty rate applies because you have a valid IRS Form W-8BEN on file with Fidelity. Each state sets its own withholding
rates and requirements on taxable distributions. We apply these rates unless you, or state law, direct otherwise.


For residents of CT, NY, NM, NJ, ND, PA and RI, you must provide a dollar amount for state withholding if you would like it withheld ($10 minimum), otherwise no amount will be withheld.

Note that the amount of tax withheld will be calculated on, and subtracted from, the amount of your distribution. Amounts withheld may be less or more than what you actually owe in taxes. Taxes will not be withheld if the distribution amount is less than the federal or state tax with­holding threshold for your marital status and number of exemptions. For recurring payments, the withholding instructions you provide here will remain in effect for this account until you give us new instructions.
The remaining part of this section allows you to choose how you want to pay the taxes (percent, dollar amount, not-at-all). So you can arrange to receive the entire MRD (RMD) before tax. (Unless your employer set up your MRD for you?)
Bolding above is my own.
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Old 03-15-2016, 05:10 PM   #24
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Originally Posted by sengsational View Post
I'm surprised there are so few laments about mandatory 20% withholding on IRA/401k withdrawals. I did great keeping my own money in the W2 days, but there seems to be no way out of the 20% thing.
I take RMD on IRA and I am not subject to any percentage (much less 20%) withholding. I have an optional withholding but I do not elect to do so.
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Old 03-16-2016, 02:02 AM   #25
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One SIL does that deliberately to "save" for their yearly vacation. Apparently she's one of those who can't stand to see a dollar in the bank and I'm quite certain that had she been in the group for the marshmallow test she would have failed.
Interestingly, and totally off topic, I have discovered that DW is a first marshmallow eater. We hadn't watched any of the last season of Downton Abbey until recently. But we've been watching an episode every night or so recently. Tonight we watched the next to the last one, finishing at 10:30. I turned the TV off, planning to enjoy the final episode in a day or two. She insisted we finish the series tonight, she absolutely can't wait even though the show won't be over until midnight. Truthfully, I enjoyed it, although I'd have been fine with waiting for a day or so to reach the end. Just another interesting insights into the different personalities that exist in the world.
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Old 03-16-2016, 06:56 AM   #26
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Originally Posted by Sunset View Post
We need a new system:
You do your return, the IRS validates it, and then sends you a bill for the total taxes for the year, and you pay it to the one address for entire country.
No refunds needed. No $5 Billion/yr scammers.
I suspect it would have more to do with a huge uproar over the taxes that would be needed to be paid. And people would not have the money as a secondary reason.
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Old 03-16-2016, 08:00 AM   #27
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Originally Posted by harley View Post
Interestingly, and totally off topic, I have discovered that DW is a first marshmallow eater. We hadn't watched any of the last season of Downton Abbey until recently. But we've been watching an episode every night or so recently. Tonight we watched the next to the last one, finishing at 10:30. I turned the TV off, planning to enjoy the final episode in a day or two. She insisted we finish the series tonight, she absolutely can't wait even though the show won't be over until midnight. Truthfully, I enjoyed it, although I'd have been fine with waiting for a day or so to reach the end. Just another interesting insights into the different personalities that exist in the world.
She might have waited if she were promised an extra episode beyond the last one!
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Old 03-16-2016, 12:54 PM   #28
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I take RMD on IRA and I am not subject to any percentage (much less 20%) withholding. I have an optional withholding but I do not elect to do so.

DH's TIAA-CREF 401k gives him an option of 10% or 20% withholding. For the 2016 tax year we might be getting some of that back for the first time.


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Old 03-16-2016, 01:10 PM   #29
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Originally Posted by sengsational View Post
I'm surprised there are so few laments about mandatory 20% withholding on IRA/401k withdrawals. I did great keeping my own money in the W2 days, but there seems to be no way out of the 20% thing.
I take RMDs and elect to have no tax witholding. I pay estimated taxes each quarter.
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Old 03-16-2016, 07:30 PM   #30
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I take RMDs and elect to have no tax witholding. I pay estimated taxes each quarter.
My mother and my MIL both take RMDs, and do not have anything withheld. The do pay estimated taxes quarterly.

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Old 03-17-2016, 09:42 AM   #31
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Originally Posted by pb4uski View Post
I haven't experienced that 20% withholding since I have yet to take IRA withdrawals, but there is not withholding on Roth conversions so why couldn't one just do a Roth conversion and then withdraw from the Roth as a workaround?
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Originally Posted by Gotadimple View Post
Why is it mandatory? I have been withdrawing from my IRA since 2010 and have declined to have Schwab withhold anything.
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Originally Posted by gauss View Post
I believe that 401k's have the required 20% withholding on distributions.
gauss got it. My comment was lacking information about the fact that this was a 401k pull.

But I think I now understand why there is no lamenting: the only ones that can't do the Roth conversion trick are those of us between 55* and 59.5.

EDIT: Thinking more about it, if I ran the money through my Roth, that would be less money in my Roth later, and Roth's are the best type of account to delay pulling from, right? I think from now on, if I pull from the 401k, I'll do it in December so I'll get my money back in just a few months.

* Possibly as young as 54.01 for a late December birthday, but we won't go there.
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