MRD Tips

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Good article today on the Fidelity website about MRDs from one's deferred tax accounts.

https://news.fidelity.com/news/arti...g-the-most-of-MRDs&topic=living-in-retirement

Here is a little gotcha that I didn't know about:

If you’re already taking MRDs, it’s not too late to convert and reap the benefits of a Roth IRA. But be careful, warns Leon LaBrecque, a certified financial planner and managing partner of LJPR, a wealth management firm in Troy, Mich., because you’ll still have to take an MRD in the year you convert. LaBrecque suggests using the proceeds of your MRD to pay the tax on the Roth conversion.

“Just be sure you take the MRD first, before you do the conversion,” says LaBrecque. Moreover, before you make the switch be sure to take into account what effect, if any, it could have on your overall tax situation.

My MRD plan is to take the years requirement in equal monthly installments starting in January, but if markets should tank and I want to do an immediate conversion, broker will withdraw the balance of the years requirement stat, leaving me clear to do the conversion without conflict with MRDs.


Ha

 

[FIRE'd@51]

Their discussion of the charitable contribution issue is incomplete. As I understand it, a direct contribution from an IRA to a charity, under current tax law, does not add to your AGI, which can cause other tax problems, e.g. higher Medicare Part B premiums, increased medical deduction threshold, etc. If this isn't extended, yes, you can still make a charitable deduction to offset the MRD, but it won't reduce your AGI, only your taxable income.

 

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Their discussion of the charitable contribution issue is incomplete. As I understand it, a direct contribution from an IRA to a charity, under current tax law, does not add to your AGI, which can cause other tax problems, e.g. higher Medicare Part B premiums, increased medical deduction threshold, etc. If this isn't extended, yes, you can still make a charitable deduction to offset the MRD, but it won't reduce your AGI, only your taxable income.

I didn't get into that part, as i had an immediate issue to deal with.

But unless this is very different from anything I know about, nothing can substitute for MRDs. However anything you do that gets money out of your tax-deferred account prior to Dec 31 of the year prior will reduce the amount on which the following years MRD will be assessed.

Ha

 

[haha]

Their discussion of the charitable contribution issue is incomplete. As I understand it, a direct contribution from an IRA to a charity, under current tax law, does not add to your AGI, which can cause other tax problems, e.g. higher Medicare Part B premiums, increased medical deduction threshold, etc. If this isn't extended, yes, you can still make a charitable deduction to offset the MRD, but it won't reduce your AGI, only your taxable income.

I reread the article in its entirety. I don't see that your issue is addressed anywhere anywhere in it.

The article does not pretend to be an omnibus plan for how to deal with Roths, other IRAs and 401Ks, charitable gifts and other budget and tax matters. There is a brief mention of charitable gifts, but not with respect to AGI.

It did give me a heads up on my issue-the interaction of RMDs with Roth conversions.


Ha

 

[FIRE'd@51]

I reread the article in its entirety. I don't see that your issue is addressed anywhere anywhere in it.

The article does not pretend to be an omnibus plan for how to deal with Roths, other IRAs and 401Ks, charitable gifts and other budget and tax matters. There is a brief mention of charitable gifts, but not with respect to AGI.

That was my point, and why I said the discussion WRT charitable contributions was incomplete. The beauty of the current tax law, which allows a direct distribution (MRD or otherwise) to a qualified charity, is that the distribution is an "above the line" deduction and, therefore, doesn't increase one's AGI. This is not a minor point. It's sort of analogous to selling a stock first and donating the proceeds to charity, as opposed to donating the shares directly.

 

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That was my point, and why I said the discussion WRT charitable contributions was incomplete. The beauty of the current tax law, which allows a direct distribution (MRD or otherwise) to a qualified charity, is that the distribution is an "above the line" deduction and, therefore, doesn't increase one's AGI. This is not a minor point. It's sort of analogous to selling a stock first and donating the proceeds to charity, as opposed to donating the shares directly.

Don't worry compadre, I understand your point. I just don't think you make a valid criticism of the article, which after all like most articles has a fairly circumscribed purpose, in this case RMDs. The average investor would not bother to read anything such as you describe. And neither would I, unless my purpose was to learn about the taxation of charitable contributions. Currently my #1 charity is my dinner menu, and wanting to be certain that it continues to be appealing. And random acts of kindness.

If I need more specialized information, I will then look into it.

Ha