IRA RMD True or False

[TromboneAl]

True or False:

If you don't care about leaving an inheritance, then there's no reason to be concerned about RMD's from your IRA.

 

[Gumby]

I think false. The RMD's create taxable income that may raise you to an AGI where your social security benefits are taxed.

 

[TromboneAl]

Yes, but that's going to be true when you withdraw the money later also, and if you're not planning on leaving any money behind, you may as well take it out earlier, yes?

 

[2B]

Tax management is always an issue. Death and taxes.... you're doomed to both. RMD is the government's way of getting their cut. Defer RMD as long as possible if you want but if you don't care about leaving an inheritance you should withdrawl it now and spend it now. Anyone worrying about RMD has more money than they need for basic expenses.

 

[Gumby]

The problem is that the tax code is not linear, but rather has step increases in rates. Suppose you are trying to stay in the 15% bracket to take advantage of the favorable capital gains rate this year. Further suppose that $5001 will put you over the top of 15% bracket. Then suppose that next year, your investments have not done as well and it would take $5601 to put you over the top. If there were no RMD's, you could take $5000 out of your IRA this year and $5600 next year without triggering the higher capital gains rate. But now assume that your RMD is $5300. Over two years, you take out exactly the same amount of money, but you pay more tax, because you were captapulted into a higher tax bracket in year one and lost your favorable capital gains rate. When you are forced to take RMD's, it really screws up your tax plannning.

 

[cute fuzzy bunny]

Even after an RMD, you can always reinvest the money. You just have to pay the extra taxes.

 

[Martha]

Interesting question. If your RMD are causing you to take out more money than you ordinarily would have and paying more taxes as a result, maybe the solution is to give to charity to cut down your taxable income.

 

[cute fuzzy bunny]

If this sounds good, I can register as a charity in just a couple of minutes and send all y'all my bank account transfer information...

 

[d]

as a general rule, any reduction in an individual's "degrees of freedom" is a negative ...