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Old 02-08-2019, 06:00 PM   #41
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As others have said, take it (you really have to) and reinvest in the same stuff you took it out of. Then you can leave it there until you pass away.
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Old 02-08-2019, 06:51 PM   #42
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Originally Posted by GrayHare View Post
You don't have to pay the taxes if you donate the RMD to charity via QCD.


I would rather pay the taxes than not having it.
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Old 02-08-2019, 07:15 PM   #43
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The reason for RMD: The government wants to tax you while you are still living. If there is no RMS, the IRA will get inherited after you kick the bucket....but there is still no taxes for the government unless the spouse or heir cashes out. The RMD maintains a certain cash flow back to the government.

I would collect the RMD, pay the taxes and enjoy the money. You earned it.....or invest the money in a taxable mutual fund where there are no RMD.
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Old 02-08-2019, 07:52 PM   #44
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Originally Posted by vchan2177 View Post
The reason for RMD: The government wants to tax you while you are still living. If there is no RMS, the IRA will get inherited after you kick the bucket....but there is still no taxes for the government unless the spouse or heir cashes out. The RMD maintains a certain cash flow back to the government.

I would collect the RMD, pay the taxes and enjoy the money. You earned it.....or invest the money in a taxable mutual fund where there are no RMD.

However, if it is an inherited IRA, there is an RMD calculated on the age of the inheritor, unless it is a spouse. My IRA has DW as the beneficiary, but if she passes before I do, the contingent beneficiaries are her 2 sons. When they inherit the IRA, they would have to take RMD's based on the IRS table.


The whole misunderstanding of RMD's is some people think you have to give all the RMD money to the IRS. Not true, you just have to pay the tax on the RMD. Foe example, if your RMD is $10,000, and you are in the 17% bracket, the tax is only $1700., leaving you with $8300 to keep and do with whatever you want. Spend, it, reinvest it, give it to you kids, etc.
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Old 02-08-2019, 07:58 PM   #45
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One of the mistakes I made early in my early retirement was playing the game of trying to minimize my taxes as close to zero as possible. It then occurred to me that I was spending my taxable funds and I was increasing my RMD and taxes later. So I started pulling all my retirement expenses from my IRA and pulled extra out for ROTH conversion up to the tax rate I was willing to pay.

My Roth, from when I was working and conversion, is about a 1/3 of my total assets, which I figure would be our long term care funds if we need it. Early on I decided I didn't want to much in ROTH since I don't trust the government not to change the rules and end up double taxing the ROTH. If they decided to replace part or all of the income tax with a federal sales tax the ROTH would be effectively taxed when used.

I am using QCD for the charities we already support and the rest is just income to do with as we would income from any source, spend/invest. I do use the RMDs to rebalance my AA as much as possible on a month to month bases and then do additional rebalancing when I get to far off my AA.
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Old 02-08-2019, 08:41 PM   #46
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If you don't need it, give it away or reinvest per your investment policy statement. I don't know why this is complicated.
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Old 02-09-2019, 08:06 AM   #47
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One of the mistakes I made early in my early retirement was playing the game of trying to minimize my taxes as close to zero as possible. It then occurred to me that I was spending my taxable funds and I was increasing my RMD and taxes later. So I started pulling all my retirement expenses from my IRA and pulled extra out for ROTH conversion up to the tax rate I was willing to pay.

My Roth, from when I was working and conversion, is about a 1/3 of my total assets, which I figure would be our long term care funds if we need it. Early on I decided I didn't want to much in ROTH since I don't trust the government not to change the rules and end up double taxing the ROTH. If they decided to replace part or all of the income tax with a federal sales tax the ROTH would be effectively taxed when used.

I am using QCD for the charities we already support and the rest is just income to do with as we would income from any source, spend/invest. I do use the RMDs to rebalance my AA as much as possible on a month to month bases and then do additional rebalancing when I get to far off my AA.
Great post! You are spot on about trying to save on taxes early while paying more later. Perhaps much more, depending on your assets and tax rates in the future. Just curious, at what age did you come to this realization? I did as well when I was about 50. And I too have been stuffing the Roth account and have about 25% of assets currently in Roth. I have made it my personal goal to tell my kids' and their generation to get this right in their 20's. I don't know if they can imagine their fortunes when they get to retirement age but I sure can. In a sense, I'm trying to dream for them. The only thing that would keep them from realizing this is not understand the power of (tax free) compounding.
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Old 02-09-2019, 08:32 AM   #48
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Reading this thread, I get the idea that some people think that all of the assets in their IRA are theirs.
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Old 02-09-2019, 11:26 AM   #49
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Great post! You are spot on about trying to save on taxes early while paying more later. Perhaps much more, depending on your assets and tax rates in the future. Just curious, at what age did you come to this realization? I did as well when I was about 50. And I too have been stuffing the Roth account and have about 25% of assets currently in Roth. I have made it my personal goal to tell my kids' and their generation to get this right in their 20's. I don't know if they can imagine their fortunes when they get to retirement age but I sure can. In a sense, I'm trying to dream for them. The only thing that would keep them from realizing this is not understand the power of (tax free) compounding.
I learned early about living below my means and saving/investing, probably mid 20s. This allowed me to retire at 57, I was actually ready at 55 but was enjoying work at that time so delayed a couple of years. Unfortunately I didn't change my ideas on funding my retirement for a few years, so maybe 60. I waited till I was 70 to draw SS so I still had some time to balance pre/post tax/roth accounts better.
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Old 02-09-2019, 11:44 AM   #50
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I take the RMD from my Beneficiary IRA every year and invest it in my brokerage account or CD's.
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Old 02-09-2019, 11:47 AM   #51
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In a sort of half-a$$ed attempt to minimize the infamous "tax torpedo", I have been withdrawing more from the TSP than an RMD would be, each year since I retired at age 61. Basically I have been leaning on the TSP for spending money a bit more than I otherwise would have and sparing my taxable investment accounts. I hoped by doing so, to draw down the amount invested in my TSP and thus my RMD amounts. So far, so good.

Anyway, 2018 was my first year of RMD's and to meet these requirements, I continued to withdraw the same amount in equal monthly TSP payments as I have been all along. It's taxable but then it has always been taxable.
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Old 02-09-2019, 12:14 PM   #52
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Originally Posted by jimbee View Post
If you don't need it, give it away or reinvest per your investment policy statement. I don't know why this is complicated.
I agree. Extra money given to your young grandsons or granddaughters for their college fund can be very satisfying. Extra money to buy a yacht can also be satisfying. This is not complicated at all.
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Old 02-09-2019, 12:51 PM   #53
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Remember that your total spend + gifts + tax still needs to be within your planned SWR.
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Old 02-09-2019, 01:37 PM   #54
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Or, you can buy a horse, boat, or airplane. Any will quickly drain whatever cash you have left.
I can guarantee that if you buy a horse you will have no problem needing and/or spending future RMDs.
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Old 02-09-2019, 03:40 PM   #55
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Reading this thread, I get the idea that some people think that all of the assets in their IRA are theirs.
I actually DO know what you mean - and agree with you, but, my first reading of your post made me think you worked for IRS or were a long-service congress person. My bad!
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Old 02-09-2019, 07:52 PM   #56
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I have managed my mom's RMD for the past 15 years, she doesn't spend what she gets in SS and DD's pension. Fidelity allows me to move securities over into her taxable account, and I allow enough dividends to stay in cash to pay the 20% withholding.
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Old 02-10-2019, 12:00 AM   #57
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I would rather pay the taxes than not having it.
I understand, if you are creating charitable distributions, just to avoid taxes.

However, if you had expected (budgeted) a particular amount for charity anyway, then the best way to fund that amount is through a QCD, so that it is untaxed.
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Old 02-11-2019, 08:47 AM   #58
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I didn't read all of the posts so this may be a repeat. You can use RMD's to do Qualified Charitable Contributions. This reduces taxable income by the amount you donate. For some this is a good solution since the standard deduction now is higher than itemizing deductions.
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