Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Kitces : Strategies to reduce or delay RMD obligations
Old 12-06-2017, 10:51 AM   #1
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,677
Kitces : Strategies to reduce or delay RMD obligations

Kitces has a new blog post on strategies to reduce or delay RMD obligations.

https://www.kitces.com/blog/minimize...l-obligations/


I had a good laugh at the "still working" category. I'm sure it will be popular on this board

He lists a number of strategies and unfortunately, the only one that may benefit us is the use of a longevity annuity. But we have years to mull over that option.
__________________

__________________
walkinwood is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-06-2017, 11:01 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,461
I like the "Leveraging Joint Life Expectancy Tables With A Much-Younger Spouse" idea... I'll have to discuss it with DW.... of course, that might result in a whole host of other issues that might make the RMD problem moot.
__________________

__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 12-06-2017, 11:13 AM   #3
Thinks s/he gets paid by the post
Big_Hitter's Avatar
 
Join Date: May 2013
Location: In the fairway
Posts: 4,099
i don't get the first example - "still working at 70.5"

really?

overall - really good summary of the options
__________________
Swing hard, look up
Big_Hitter is offline   Reply With Quote
Old 12-06-2017, 12:24 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
braumeister's Avatar
 
Join Date: Feb 2010
Location: Northern Kentucky
Posts: 8,620
Excellent article. Thanks for the link.
__________________
Pas de lieu Rhône que nous.
braumeister is offline   Reply With Quote
Old 12-06-2017, 03:14 PM   #5
Full time employment: Posting here.
 
Join Date: Sep 2014
Location: Grapetown
Posts: 806
Quote:
Originally Posted by pb4uski View Post
I like the "Leveraging Joint Life Expectancy Tables With A Much-Younger Spouse" idea... I'll have to discuss it with DW.... of course, that might result in a whole host of other issues that might make the RMD problem moot.
If you survive.....
__________________
Winemaker is offline   Reply With Quote
Old 12-06-2017, 03:17 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,461
with my luck I would just be maimed.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 12-06-2017, 03:20 PM   #7
Thinks s/he gets paid by the post
 
Join Date: Oct 2012
Location: Colorado Mountains
Posts: 2,145
I am in the same boat as Betsy in Example 6 where he talks about doing partial Roth conversions. What he does not touch on is the interplay between income, taxes, and Medicare costs and the additional analysis needed to determine the best approach. If I bump up my income by doing Roth conversions that will mean I go into a higher income bracket for Medicare and will have to pay more into that bucket. The total out-of-pocket costs of money moving to the government are what is important to me. Whether I pay that additional money to taxes or Medicare seems immaterial to me.
__________________
Hermit is online now   Reply With Quote
Old 12-06-2017, 04:19 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
braumeister's Avatar
 
Join Date: Feb 2010
Location: Northern Kentucky
Posts: 8,620
Yes, good point. Tax brackets and the Medicare MAGI brackets have to both be considered. I've been careful about that since missing the MAGI once and landing in a higher IRMAA category for a year. Now I have them both in my spending projections spreadsheet and they turn colors if they go over the limit.
__________________
Pas de lieu Rhône que nous.
braumeister is offline   Reply With Quote
Old 12-07-2017, 12:39 AM   #9
Recycles dryer sheets
 
Join Date: Nov 2017
Posts: 139
Quote:
Originally Posted by walkinwood View Post
Kitces has a new blog post on strategies to reduce or delay RMD obligations.

https://www.kitces.com/blog/minimize...l-obligations/


I had a good laugh at the "still working" category. I'm sure it will be popular on this board

He lists a number of strategies and unfortunately, the only one that may benefit us is the use of a longevity annuity. But we have years to mull over that option.
Another link is mentioned
https://www.kitces.com/blog/using-sy...acket-buckets/
that expands on doing Roth conversions over time, and more on the effects of ACA subsidies (making "marginal rates" much higher) is here
https://www.kitces.com/blog/how-the-...inal-tax-rate/

The thing that will block us from Roth conversions for most of our post-retirement pre-70.5 years is that for 9(?) years we will have kids in college, so we don't want the boost in income from Roth conversions (effectively the FAFSA calculation makes the "marginal rates" much higher, just like with ACA).

On the other hand we have zero pension and zero SS (and zero other income), so there's really no tax torpedo for us. Even if the Trad balance was sizeable (e.g. $2M), the RMDs would be in a low tax bracket like 15% (or maybe it'll be 12%). The only thing that can go wrong is if investment growth makes the balance keep growing, but that's hardly a problem.

But you do need a long term strategy, to both take advantage of low brackets to realize income, while avoiding that in high brackets (where "bracket" takes everything into account).

One more thing to consider is that your tax bracket can change from MFJ to single upon widowhood, which can put you in a higher bracket.
__________________
43210 is online now   Reply With Quote
Old 12-07-2017, 08:36 AM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,646
Whoa = what a site. You learn something new every day. I will probably have to consult an accountant to verify but it seems to me that DW may qualify to delay RMDs by 5 years. Maybe some of the more knowledgeable tax gurus here may know.

DW hasn't done a lick of work in 5 years BUT she is technically still employed. She is one of the last few attorneys at her firm who was grandfathered into an old partnership agreement that has since been changed. Under the agreement she is a "Special Partner" working under a 0-25% category that gives her $30K/yr COLAd (based on her earnings and years before she voluntarily changed from Equity Partner to Special Partner). In plain language she can do zero work and still receive the $30K. It is sort of like a stipend to be on the roles. She pays self employed Social Security and Medicare for this income. At age 75 she automatically switches over to "retired partner" under this plan and will receive 1/2 of the then amount of compensation as retired pay (no longer income). This is a big firm and DW already got her capital out so she doesn't have an ownership interest, much less 5%.

Sounds like she can postpone RMDs on the 401K funds in her work plan until age 75. That will entail a substantial tax savings for those few years. It also sounds tricky so we will need to be sure it applies. She is 65 so a few years away.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 12-07-2017, 08:47 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,515
Kitces does fantastic work. I’m often reading articles from years ago refining strategies! I think he writes mainly for professional financial planners. I’m just so glad his blog is available for us DIY investors.

He also reigns in Pfau occasionally, by challenging his assumptions. Nice public service that.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Old 12-07-2017, 09:04 AM   #12
Full time employment: Posting here.
 
Join Date: Jun 2013
Posts: 621
If I or DW don't need the money, Qualified Charitable Distributions may be the way to go.
__________________
Which Roger is offline   Reply With Quote
Old 12-07-2017, 09:51 AM   #13
Thinks s/he gets paid by the post
 
Join Date: Oct 2012
Location: Colorado Mountains
Posts: 2,145
Quote:
Originally Posted by Which Roger View Post
If I or DW don't need the money, Qualified Charitable Distributions may be the way to go.
If charity was not already a known element in my overall financial plan, I would have to think long and hard about this as a major change to my overall financial plan.

My charitable contribution plan was put in place long before I decided that from a tax perspective it would make best sense to use QCDs to implement the plan. If not for that, I would probably limit QCDs to my normal giving level or perhaps an enhanced level of giving depending on where my stash was destined at my demise.
__________________
Hermit is online now   Reply With Quote
Old 12-07-2017, 09:55 AM   #14
Recycles dryer sheets
 
Join Date: Jul 2013
Posts: 345
Quote:
Originally Posted by pb4uski View Post
I like the "Leveraging Joint Life Expectancy Tables With A Much-Younger Spouse" idea... I'll have to discuss it with DW....
I recently suggested to the DW that we find someone significantly younger to help out 'around the house.' She assured me that anything she couldn't handle, I could handle myself!

I am clearly no longer able to hold public office of any kind...
__________________
In alcohol's defense- I've made some pretty bad decisions while completely sober.
Clone is offline   Reply With Quote
Old 12-07-2017, 09:57 AM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,287
Quote:
Originally Posted by Hermit View Post
I am in the same boat as Betsy in Example 6 where he talks about doing partial Roth conversions. What he does not touch on is the interplay between income, taxes, and Medicare costs and the additional analysis needed to determine the best approach. If I bump up my income by doing Roth conversions that will mean I go into a higher income bracket for Medicare and will have to pay more into that bucket. The total out-of-pocket costs of money moving to the government are what is important to me. Whether I pay that additional money to taxes or Medicare seems immaterial to me.

That is the same thought I have with the ACA credit... I would rather keep the income low and get more credit now than convert and maybe save taxes in the future...
__________________
Texas Proud is offline   Reply With Quote
Old 12-07-2017, 10:13 AM   #16
Thinks s/he gets paid by the post
Souschef's Avatar
 
Join Date: Dec 2015
Location: Santa Paula
Posts: 1,197
Quote:
Originally Posted by Which Roger View Post
If I or DW don't need the money, Qualified Charitable Distributions may be the way to go.
+1
I have been doing it for a while. My broker suggested a QLAC, but after researching it, the bottom line was i would be lucky to get my principal back at age 85. plus, as you get older, the RMD percentage goes up.
__________________
Retired Jan 2009 Have not looked back.
AA 95%/0/5
WR 2% SI 2SS & 2 Pensions
Souschef is offline   Reply With Quote
Old 12-07-2017, 10:18 AM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 5,695
Silly question, how to pronounce Kitces?
__________________
Lsbcal is offline   Reply With Quote
Old 12-07-2017, 10:21 AM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 5,695
Quote:
Originally Posted by Clone View Post
...

I am clearly no longer able to hold public office of any kind...
Don’t worry, the standards for this are being lowered daily.
__________________
Lsbcal is offline   Reply With Quote
Old 12-07-2017, 10:43 AM   #19
Recycles dryer sheets
 
Join Date: Jul 2013
Posts: 345
Does a Donor Advised Fund qualify as a Qualified Charitable Distribution?

https://www.vanguardcharitable.org/n...ritable-giving
https://www.fidelitycharitable.org/p...-charity.shtml

Apparently this is not an option. It looks like you can donated directly from your IRA to 501(c)(3) organizations to meet your RMD requirements. So this may create an opportunity to use a DAF to bunch deductions prior to 70.5, then go directly from the account that requires RMDs after age 70.5.

Now to figure out is I can go direct from my inherited IRA (which has RMDs immediately) to a Qualified Charitable Deduction.

https://www.fidelity.com/building-sa...ributions/qcds

Looks like that is a no-go. It looks like the path to go directly from an IRA to a QCD only exists after age 70.5.
__________________
In alcohol's defense- I've made some pretty bad decisions while completely sober.
Clone is offline   Reply With Quote
Old 12-07-2017, 10:44 AM   #20
Thinks s/he gets paid by the post
2017ish's Avatar
 
Join Date: Apr 2012
Posts: 1,848
Quote:
Originally Posted by Lsbcal View Post
Silly question, how to pronounce Kitces?
I'm not good at this, but "kit_siz" with no hard accent on either syllable (maybe slightly on the second?). Listen at 12 second mark on this video:

__________________

__________________
OMY * 3 2ish Done 7.28.17
2017ish is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Kitces: / Managing Sequence Of Return Risk With Bucket Strategies Vs A Total Return macav933 FIRE and Money 21 12-06-2014 10:38 AM
Trad IRA RMD and Roth Conversion Strategies to Minimize Income Taxes chinaco FIRE and Money 31 04-10-2012 10:07 PM
Federal obligations NOW a record $546,668 per household snodog FIRE and Money 11 05-30-2009 09:15 AM
Looking for tax strategies against the RMD of IRAs whitestick FIRE and Money 12 10-28-2007 01:40 AM
Even the Catholic Church is dumping pension obligations... gratefuled Other topics 10 05-14-2005 02:00 PM

 

 
All times are GMT -6. The time now is 10:50 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.