RMD Folks how are you using the money

[Sunset]

Quote:

Originally Posted by meierlde At 70.5 the RMD is 4% for singles couples of roughly equal ages, increasing to 5% at 78 6% at 83 7% at 86 8% at 89 10% at 93 etc. the table given here IRA Required Minimum Distribution Worksheet gives the number of years of life expectancy, and you divide you jan 1 amount by that number.

RMD starts at 3.649635036 not 4% , although rounding up to 3.7% might be easier for some folks.

[audreyh1]

I think you cross 4% at age 73 with the RMD tables.

[marko]

Just to illustrate the confusion out there:
Yesterday I was out with BIL. He's a major finance guy (director level) with one of the largest financial institutions in the country. Wall Street type.

We were casually talking about retirement (he's trying to figure out how I did it) but then he said: "Yeah, but at 70 [your RMD kicks in] if you don't spend it, it's gone".

He was absolutely stunned when I explained that it was essentially taking it from one pocket and putting it into the other minus taxes.

To be fair, he's a very smart, focused guy who's work only looks at a narrow piece of the finance world --RE is not in the cards for his lifestyle, so he isn't focused on it--but if he gets confused I'm sure there's a whole lot of others who are too.

[Dtail]

Quote:

Originally Posted by marko Just to illustrate the confusion out there: Yesterday I was out with BIL. He's a major finance guy (director level) with one of the largest financial institutions in the country. Wall Street type. We were casually talking about retirement (he's trying to figure out how I did it) but then he said: "Yeah, but at 70 [your RMD kicks in] if you don't spend it, it's gone". He was absolutely stunned when I explained that it was essentially taking it from one pocket and putting it into the other minus taxes. To be fair, he's a very smart, focused guy who's work only looks at a narrow piece of the finance world --RE is not in the cards for his lifestyle, so he isn't focused on it--but if he gets confused I'm sure there's a whole lot of others who are too.

Very good point.
Sounds close to me. Director level at Wall Street firm dealing with valuation no less, but didn't really pay attention to personal finance until last few years of work.

[RobbieB]

Yeah, that's pretty funny.

Sure, you have to take it but if you don't spend it all the rest of it just dissolves into the atmosphere?

Amazing.

[omni550]

Quote:

Originally Posted by RobbieB Yeah, that's pretty funny. Sure, you have to take it but if you don't spend it all the rest of it just dissolves into the atmosphere? Amazing.

Well, in my case, a sizeable chunk of it will "evaporate" as taxes.....

omni

[RobbieB]

Yup, that's a fact, no bout a dout it. That's the deal we all knew up front when we enlisted. And it all "ordinary income" too, not favored like muni bond interest or cap gains or qualified dividends.

So what? You still have most of it eh?

[Hermit]

Quote:

Originally Posted by RobbieB Yup, that's a fact, no bout a dout it. That's the deal we all knew up front when we enlisted. And it all "ordinary income" too, not favored like muni bond interest or cap gains or qualified dividends. So what? You still have most of it eh?

That's true! When Uncle Sam and his buddies in State and Medicare are done, they will "only" take somewhere around 1/3.

[RobbieB]

Yup it costs dough to live well in America.

[audreyh1]

Quote:

Originally Posted by marko Just to illustrate the confusion out there: Yesterday I was out with BIL. He's a major finance guy (director level) with one of the largest financial institutions in the country. Wall Street type. We were casually talking about retirement (he's trying to figure out how I did it) but then he said: "Yeah, but at 70 [your RMD kicks in] if you don't spend it, it's gone". He was absolutely stunned when I explained that it was essentially taking it from one pocket and putting it into the other minus taxes. To be fair, he's a very smart, focused guy who's work only looks at a narrow piece of the finance world --RE is not in the cards for his lifestyle, so he isn't focused on it--but if he gets confused I'm sure there's a whole lot of others who are too.

Call me stunned. What could that possibly mean - “if you don’t spend it, it’s gone.”? Did he think unspent funds would somehow be confiscated?

[marko]

Quote:

Originally Posted by audreyh1 Call me stunned. What could that possibly mean - “if you don’t spend it, it’s gone.”? Did he think unspent funds would somehow be confiscated?

I'm not sure what he was thinking.

I was telling him how we live just on dividends. Somehow he seems to have thought that if I have to take my dividend payers out of my IRA, I can't reinvest them in the same vehicles outside of the IRA and get the same dividends. Maybe he hadn't thought of having dividend payers outside of an IRA and we'd just have to use the proceeds on expenses.

We've seen the same perception here on this forum a few times if I recall.

Once I told him that I could just reinvest, he got it. He's a high strung guy and often doesn't listen very closely because he's always trying to fit things into his own world view even when it doesn't fit. He won't focus in on retirement income until about a week before he retires.

In his defense, he makes just under $2M a year so I'd expect that he leaves such details to his accountants.

[Dog]

About 10 years before DH and I need to deal with RMDs. But, it distributions will be used for expenses and probably reinvested. But close to 70% of portfolio is in IRA and 401ks, so I need to start convert/move some to our (very small) Roth accounts as I don’t think our tax rate will ever be this low again.

[Hermit]

Quote:

Originally Posted by Dog About 10 years before DH and I need to deal with RMDs. But, it distributions will be used for expenses and probably reinvested. But close to 70% of portfolio is in IRA and 401ks, so I need to start convert/move some to our (very small) Roth accounts as I don’t think our tax rate will ever be this low again.

My advice is to get started right away. It is especially good before you start Medicare. You might even consider transferring up to the top of the 24% bracket. You need to look at the overall impact the RMDs will have once you reach that point, both to taxes and Medicare Premiums.

I am two years from RMDs and about 100% of my stash is in IRAs. Not much I can do because my income from pension and SS puts me in a high enough bracket that moving funds to Roth won't help.

[street]

Quote:

Originally Posted by Hermit My advice is to get started right away. It is especially good before you start Medicare. You might even consider transferring up to the top of the 24% bracket. You need to look at the overall impact the RMDs will have once you reach that point, both to taxes and Medicare Premiums. I am two years from RMDs and about 100% of my stash is in IRAs. Not much I can do because my income from pension and SS puts me in a high enough bracket that moving funds to Roth won't help.

I’m in the same boat not sure I gain anything taking some now. It is a bummer but it is what it is.

[meierlde]

Quote:

Originally Posted by Hermit My advice is to get started right away. It is especially good before you start Medicare. You might even consider transferring up to the top of the 24% bracket. You need to look at the overall impact the RMDs will have once you reach that point, both to taxes and Medicare Premiums. I am two years from RMDs and about 100% of my stash is in IRAs. Not much I can do because my income from pension and SS puts me in a high enough bracket that moving funds to Roth won't help.

Using todays tax rates (2018) and your ira balance figureout what tax bracket the RMD will put you in. Then look at how much you could withdraw this year to stay in the next lower bracket and at least withdraw that much.


Remember to do this using the procedure for qualified dividends. i.e. the qualified dividends in general don't affect the ordinary income tax bracket.

[Hermit]

Quote:

Originally Posted by meierlde Using todays tax rates (2018) and your ira balance figureout what tax bracket the RMD will put you in. Then look at how much you could withdraw this year to stay in the next lower bracket and at least withdraw that much. Remember to do this using the procedure for qualified dividends. i.e. the qualified dividends in general don't affect the ordinary income tax bracket.

There are no qualified dividends in an IRA. It is all just income when distributed. I am bumping up against the tax bracket now and Medicare Premiums start at about the same point and increase fairly quickly with the amount distributed.

For my own dilemma, I am going to donate the RMDs to charity in the form of QCDs. That is part of my estate planning and will put off actual RMDs for a few years and maybe even lower the overall stash and hence the RMD amounts.

[meierlde]

Quote:

Originally Posted by Hermit There are no qualified dividends in an IRA. It is all just income when distributed. I am bumping up against the tax bracket now and Medicare Premiums start at about the same point and increase fairly quickly with the amount distributed. For my own dilemma, I am going to donate the RMDs to charity in the form of QCDs. That is part of my estate planning and will put off actual RMDs for a few years and maybe even lower the overall stash and hence the RMD amounts.

I was speaking of qualified dividends in a taxable account. Any taxable qualified dividends don't affect the tax bracket for other income. (see the capital gains and qualified dividends work sheet part of the instructions for schedule D.

[Dtail]

Quote:

Originally Posted by meierlde Using todays tax rates (2018) and your ira balance figureout what tax bracket the RMD will put you in. Then look at how much you could withdraw this year to stay in the next lower bracket and at least withdraw that much. Remember to do this using the procedure for qualified dividends. i.e. the qualified dividends in general don't affect the ordinary income tax bracket.

I have started to look at future RMD's/ Roth conversions etc. I don't keep a sophisticated spreadsheet as to future returns, etc, although do keep track of every expense.
Thus was wondering if one wishes to lower their RMD's to end up fitting at least their current withdrawals (plus expected SS which I can figure out), does one look at the RMD tables through their predicted ending mortality, or just some year before the end?

[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.

[omni550]

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