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Old 07-03-2018, 07:09 PM   #121
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We have a decent income, so we use it to pay our income tax.
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Old 07-03-2018, 07:23 PM   #122
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Quote:
Originally Posted by omni550 View Post
Quote:
Originally Posted by Bart523
My wife works part time and I’ve been retired for five years. We contribute the full amount of her earnings to our Roth IRA’s using RMD. The rest goes into a money market account for unexpected expenses, home improvements, and travel.
Just wondering, is that allowed? Perhaps you're moving money around per the rules, it just sounded a bit odd.

Roth IRA: Can I Put My Required Distribution in a Roth? | Money says:

IRS rules prohibit putting your RMD into another tax-advantaged retirement account. But you can convert the remaining portion of your traditional IRA assets to a Roth IRA, though it will mean paying more taxes. “You just have to satisfy the RMD requirement before you do a Roth conversion,” says Mingone. (If you aren’t working and receiving earned income, you can’t make a contribution to a Roth but once the money is in a traditional IRA, you don’t need to have additional earned income to move the money to a Roth IRA.)

omni
It looks to me that this is just another mash-up of compartmentalizing funds, rather than recognizing that money is money (fungible).

AFAIK, it is legitimate to make a ROTH contribution up to your earnings (considering any other limits), and if one spouse has, say $10,000 earnings, each spouse can make a $5,000 Roth contribution in that year.

I don't think RMDs affect that - and your article quote only seems to address the case on no earned income. The quoted poster has earned income.

So what would have been far clearer to say, IMO, is that they made Roth contributions up to their earned income and/or any other Roth limit, and they took their RMD. You can't really trace which dollar went where, and I don't think Uncle Sam tries to either, as long as the amounts match regs.

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Old 07-03-2018, 07:26 PM   #123
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Boy tough problem we have, money coming we don't need. I fell into that category this month when my first SS money was deposited in my checking account at 70 years old. Started RMD in January spread out over the whole year since I would turn 70.5 in December and would have to take the full years worth anyway. Vanguard advisor asked what I wanted do with the RMD, all set to give me a spiel on investing, and I said send it. Turned out to be very close to what I was already pulling out of a different after tax VG account for living expenses. Turned one off after the other turned on.

Now with SS kicking in we are splurging on some items we were planning to buy anyway but don't have to use our reserve fund. At some point we may even start paying down the mortgage with the extra but I hate to pay down a 3.5% mortgage.

I guess I'm in the minority here in that I knew my taxes would go up and don't mind, may take me a year to figure out the right amount to withhold on RMD to make the taxes come close to even. I did move some IRA money to ROTH over the last few years and paying the taxes then to get the RMD down and make some big emergency funds if we ever need assisted living. I do plan to look into QCDs next year to reduce total taxes since I don't think I will manage itemizing under the new tax laws. As I understand it you can't start doing QCDs till after 70.5.
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Old 07-03-2018, 08:19 PM   #124
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Right, no QCDs until 70.5 years and required to take RMD.
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Roth IRA's in retirement
Old 07-04-2018, 09:12 AM   #125
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Roth IRA's in retirement

The money we put in our Roth IRA's is earned income which is the only way we can contribute to a Roth as far as I know.

Perhaps I should have said we put all of our earned income into our Roth's up to the allowed maximum of 6500 each. The money from our RMD's is taxed and replaces the earned income we put in our Roth's.
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Old 07-04-2018, 09:48 AM   #126
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Boy tough problem we have, money coming we don't need. ....

RMDs are not "money coming in" from anywhere. It is money in a tax advantage account, that the IRS says we need to transfer to a taxable account.

Other than taxes, it's no different than someone consolidating two existing accounts into one. It changes nothing, other than the accounting. You are not any richer or poorer after transferring money from one account to another (outside of tax considerations).


Quote:
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The money we put in our Roth IRA's is earned income which is the only way we can contribute to a Roth as far as I know.

Perhaps I should have said we put all of our earned income into our Roth's up to the allowed maximum of 6500 each. The money from our RMD's is taxed and replaces the earned income we put in our Roth's.
Much clearer, thanks.

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Old 07-10-2018, 06:15 PM   #127
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Unless I significantly reduce my taxable income (hmm, growth stocks and muni bonds), a good chunk of my RMD is going to pay the tax on the RMD itself and on my SS.
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