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RMD from inherited IRA
Old 09-20-2019, 07:55 AM   #1
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RMD from inherited IRA

This is a trivial question - $-wise and timing-wise..... just want to know what the cool kids around here think.

DW has to take an RMD from the tIRA she inherited from her mother. This isn't the first RMD, so the amount is 1/27th of the total. The IRA was small, so think around $2400.

Let's say the IRA distribution must come from selling BRK-B shares.

Q: Given your perception of the current economic climate, plus what you know (or don't know!) of BRK-B, would you take the distribution now or at the end of the year?

I know it is most likely a toss-up (and trivial to boot).
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Old 09-20-2019, 08:59 AM   #2
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I think what you're asking is do we think the market is going to tank at any time before the end of the year.

Since you have intimated that this is a lowly $2,400/year and it possibly doesn't affect your overall budget then it really doesn't matter when you take it. If you feel uneasy about the market then just go ahead and take it.

I have an inherited IRA that we just use for traveling and I have it scheduled to pay the first week in January rain or shine. Since it's fun money I'm not concerned if it's gone up or down compared to prior years.
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Old 09-20-2019, 09:33 AM   #3
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IOW, can we time the market? No.
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Old 09-20-2019, 09:48 AM   #4
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If BRK.B is near its high, I'd sell some soon to lock in the gains and fund the RMD. "Pigs get fat, hogs get slaughtered."
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Old 09-20-2019, 12:49 PM   #5
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I move mine all over the place. I currently have it set for November, but next year's is getting changed to January. I don't care what the markets are doing, that amount isn't going to result in any significant loss or gain, so I'd suggest you not worry over when to take it and get it when you want it/have a use for it. If you legitimately can't think of any reason or want, then set it to automatically come out in early December so it's taken in a timely manner.
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Old 09-20-2019, 12:53 PM   #6
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At $2,400, why not just pull it all this year? Is the tax deferral really worth dealing with planning an RMD each year? It would be one less account to worry about. And if she were to pass, the executor/trustee would need to deal with getting it to the beneficiaries.

None of that is a lot of work, but why bother? Simplify!

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Old 09-20-2019, 01:17 PM   #7
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I agree. $2400 isn't anything to worry about, close it and pay the tax.
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Old 09-20-2019, 01:37 PM   #8
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I don't think he's saying the total account balance is $2,400. I think he is saying the RMD is $2,400 which would make the account balance somewhere in the neighborhood of $65,000. That might cause problems to pull that much as once.
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Old 09-20-2019, 01:51 PM   #9
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Yup, I was confused by erd50. Yeah 2400 but do it once a year.
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Old 09-20-2019, 01:54 PM   #10
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You're overthinking it. It's $2400, and there are 3 months left in the year. But to answer your question, I see more downside than upside in the near term, so I'd do it now. You can always invest it outside of the IRA.
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Old 09-20-2019, 02:14 PM   #11
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Since we can't see the future, I'd just wait for a relative 'up day', and take the RMD...if October is as volatile as predicted, it might be an exciting time to try to time the market, LOL.
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Old 09-20-2019, 02:28 PM   #12
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Quote:
Originally Posted by MissMolly View Post
I don't think he's saying the total account balance is $2,400. I think he is saying the RMD is $2,400 which would make the account balance somewhere in the neighborhood of $65,000. That might cause problems to pull that much as once.
He said the IRA is $2400.
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Old 09-20-2019, 02:34 PM   #13
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Originally Posted by gerntz View Post
He said the IRA is $2400.
Missy Molly has the situation correct. Total for IRA is about $65K. RMD amount for this year is about $2400.
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Old 09-20-2019, 02:39 PM   #14
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Originally Posted by GrayHare View Post
If BRK.B is near its high, I'd sell some soon to lock in the gains and fund the RMD. "Pigs get fat, hogs get slaughtered."
This is where my thinking is going. DW's parents had a nice run with the BRK.B they purchased many years ago and taking a little profit now seems like a good idea to me.
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Old 09-20-2019, 03:59 PM   #15
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I would have to think the upside is much smaller than the downside just now. But a $2400 movement and three month decision period is not worth the bother. A few hundred bucks that would average out with future RMD good/bad timings.

If you take the $2400 and buy something similar to BRK in a taxable account, or a total U.S. market index, then you end up roughly neutral regardless of what the market does.

You might also consider taking something like $800/month over the last three months and hedge your bets. No need to make this just an either/or guess.

I did all my Roth conversions (where I want to do it at market lows) at the beginning of this year, while the market seemed down. Next year I might wait for the end of the year or do several conversions throughout the year. Of course markets tend to be higher at the end of the year, on average, and I wouldn't want to bet against that without a strong conviction.

There is a right answer. We just don't know what it is yet.
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Old 09-20-2019, 07:49 PM   #16
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Speaking of RMDs from an inherited trust IRA. My wife has one that she just got. We paid an accountant to determine the RMD for the first year. Am I right to assume the RMD will now be the same permanently or do we need to pay an accountant each year to figure it out? Thanks!
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Old 09-20-2019, 07:51 PM   #17
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Originally Posted by jpeter1093 View Post
Speaking of RMDs from an inherited trust IRA. My wife has one that she just got. We paid an accountant to determine the RMD for the first year. Am I right to assume the RMD will now be the same permanently or do we need to pay an accountant each year to figure it out? Thanks!
The RMD each year is based on the ending balance of the prior year (and the life expectancy)...most institutions (like Vanguard and Fidelity) offer a free RMD service; with Vanguard, you can elect to make the annual withdrawal manually at your discretion, or you can have the house make the withdrawals automatically. No need to pay anyone. [This applies to a regular inherited IRA; I'm not sure if there's any difference for an inherited Trust IRA].
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Old 09-20-2019, 08:18 PM   #18
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Originally Posted by jpeter1093 View Post
Speaking of RMDs from an inherited trust IRA. My wife has one that she just got. We paid an accountant to determine the RMD for the first year. Am I right to assume the RMD will now be the same permanently or do we need to pay an accountant each year to figure it out? Thanks!
Whatever the RMD divisor was for the prior year, subtract one for this year. For example, if the divisor was 25 for year 2018, the RMD was (IRA balance at end of 2017) / 25. The 2019 RMD will be (IRA balance at end of 2018) / 24.
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Old 09-20-2019, 08:41 PM   #19
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It was easy enough to google the inherited RMD procedure and get the applicable table. It's very easy to calculate at that point. It is different than a normal personal IRA RMD. I don't remember seeing a Fidelity RMD calc for the first year, but after that they have agreed with my calc.
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Old 09-20-2019, 09:39 PM   #20
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Originally Posted by Animorph View Post
It was easy enough to google the inherited RMD procedure and get the applicable table. It's very easy to calculate at that point. It is different than a normal personal IRA RMD. I don't remember seeing a Fidelity RMD calc for the first year, but after that they have agreed with my calc.
It could be that the deceased had already made the RMD for the first year, and if it was at FIdelity before and after, their system would know that. That's what I saw on DW's IRA inherited from her DM.

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