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RMD? What to do with it if you don't need $
Old 02-03-2019, 02:32 PM   #1
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RMD? What to do with it if you don't need $

This addresses a "problem" that some folks here have with what in the heck should I do with all of the RMD money that the FEDS require me to take after I am 70.5 years old? It's a good problem to have. RMD is a requirement to pay taxes, not spend the cash.

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First, remember this. Uncle Sam doesn’t care what you do with your RMD. “The IRS only cares that you remove that minimum amount from a tax-deferred IRA or other non-Roth account and pay taxes on that withdrawal,” said Dirk Cotton, a financial planner and author of the Retirement Café blog. “And, don’t get too upset about paying taxes on your IRA withdrawals. The deal you chose years ago allowed you to take a tax break back then and to defer taxes into the future (now).”
Others agree. “The IRS requires the RMD be withdrawn from tax-deferred accounts after age 70˝, but it does not require that you spend the withdrawal or specify what you can do with it,” said Michael Lonier, a financial planner with Lonier Financial Advisory. “You simply withdraw it, pay the tax that is due, and put in your after-tax pocket.”
https://www.marketwatch.com/story/wh...ses-2016-11-02
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Old 02-03-2019, 02:36 PM   #2
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This comes up from time to time, the consensus seems to be just pay whatever taxes are due and put the rest in a taxable account according to your current AA.

Or, you can buy a horse, boat, or airplane. Any will quickly drain whatever cash you have left.
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Old 02-03-2019, 02:37 PM   #3
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Stand by for the usual suspects to come along and b*tch about how unfair it is that we are forced to withdraw RMD money from our IRA accounts...
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Old 02-03-2019, 02:40 PM   #4
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I didn't read the article, but is there a "problem"? Take the RMD or not (and take a nice penalty, though) and then do with it what you want.
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Old 02-03-2019, 02:40 PM   #5
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I find it hard to understand why someone wouldn't know that you do the same thing with RMD money as with any other money - spend/save/invest it, in some combination. Isn't that what people do with money all along?
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Old 02-03-2019, 02:42 PM   #6
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You don't have to pay the taxes if you donate the RMD to charity via QCD.
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Old 02-03-2019, 02:43 PM   #7
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Originally Posted by Walt34 View Post
This comes up from time to time, the consensus seems to be just pay whatever taxes are due and put the rest in a taxable account according to your current AA.

Or, you can buy a horse, boat, or airplane. Any will quickly drain whatever cash you have left.
This ^. I won't need it either so we have a few options.
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Old 02-03-2019, 02:48 PM   #8
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Isn't why we put it in an IRA in the first place to defer paying tax on it?

I love pulling the RMD each year! It makes me feel like I am getting paid again!
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Old 02-03-2019, 02:54 PM   #9
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Isn't why we put it in an IRA in the first place to defer paying tax on it?

I love pulling the RMD each year! It makes me feel like I am getting paid again!
Makes me feel like I'm getting away with something - and it's entirely legal! Paying 12% tax instead of the 31% I would have paid had I not deferred always puts a smile on my face.
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Old 02-03-2019, 02:57 PM   #10
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You don't have to pay the taxes if you donate the RMD to charity via QCD.
That's the best solution.
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Old 02-03-2019, 03:02 PM   #11
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Stand by for the usual suspects to come along and b*tch about how unfair it is that we are forced to withdraw RMD money from our IRA accounts...
But it is much more pleasurable if the market's high versus low.

But it is what it is, and the penalty for not taking the withdrawal is enormous.

Thankfully I'm good for awhile, but the wife has to start taking the RMDs this year--but not too much $.
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Old 02-03-2019, 03:15 PM   #12
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Everyone handles it differently, but here is what we do:
For DW, move equities to her taxable account to satisfy the RMD
For me,
QCD to my charities
A certain amount of $ to each of our 4 sons equally
Set aside some $ to pay estimated taxes
Last, but not least,
A 12 day cruise in a suite to Alaska leaving from LA NO airports
YMMV
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Old 02-03-2019, 03:17 PM   #13
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Stand by for the usual suspects to come along and b*tch about how unfair it is that we are forced to withdraw RMD money from our IRA accounts...


Yeah first world problems. Lol
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Old 02-03-2019, 03:18 PM   #14
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You don't have to pay the taxes if you donate the RMD to charity via QCD.

+1 After all, the subject line says "If you don't need it". I'm still too young, but would like to be in a position to do this when RMDs kick in. I would be interested in hearing others' experiences donating RMDs.
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Old 02-03-2019, 03:20 PM   #15
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Makes me feel like I'm getting away with something - and it's entirely legal! Paying 12% tax instead of the 31% I would have paid had I not deferred always puts a smile on my face.
Right: Which leads me to wonder why so many financial advisors tell people to choose a roth or a traditional.

Most of the time tax brackets drop, and most states are much more tax friendly to 1099R income one w-2 income.
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Old 02-03-2019, 03:23 PM   #16
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Stand by for the usual suspects to come along and b*tch about how unfair it is that we are forced to withdraw RMD money from our IRA accounts...
Yep, I can remember my grandmother complaining about having to start taking her RMDs. And, my Mom hits 70.5 this year, so she's starting to gripe about it, too.

I honestly don't see what the big deal is. Like others have said, that money went in tax-deferred, not tax exempt, and with the agreement that it would start getting pulled back out, eventually.

Even though I'm only 48, I had to start dealing with RMDs, because of two inherited IRAs I have. I'll admit, I was a bit disgruntled at first, but it had nothing to do with paying taxes. I just didn't feel like dealing with setting them up, in the first place! But, it was less hassle than I thought.
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Old 02-03-2019, 03:27 PM   #17
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Said another way, once you are in RMD territory all charitable contributions that you would otherwise make by writing a check should instead be made via QCD. This helps satisfy your RMD and keeps those dollars completely out of your taxable income. Anything that minimizes taxable income has at least the potential to reduce income taxes. & there is no downside to doing it.

Schwab gives us QCD checks that we can write to the charity. No other paperwork. I'm writing one this afternoon to the local public radio station. Just $90 but it all helps.
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Old 02-03-2019, 03:37 PM   #18
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Said another way, once you are in RMD territory all charitable contributions that you would otherwise make by writing a check should instead be made via QCD. This helps satisfy your RMD and keeps those dollars completely out of your taxable income. Anything that minimizes taxable income has at least the potential to reduce income taxes. & there is no downside to doing it.

Schwab gives us QCD checks that we can write to the charity. No other paperwork. I'm writing one this afternoon to the local public radio station. Just $90 but it all helps.
Plus I assume that if one's itemized deductions were under the standard deduction, this is another way of receiving the effect of the charitable deduction instead of it being swallowed up.
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Old 02-03-2019, 03:44 PM   #19
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Plus I assume that if one's itemized deductions were under the standard deduction, this is another way of receiving the effect of the charitable deduction instead of it being swallowed up.
Yes, I believe that's the case. I didn't want to try to enumerate what specific benefits might accrue because I am just not that much of a tax maven. But maybe the adjustments to medicare premiums would be affected too?
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Old 02-03-2019, 05:08 PM   #20
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But it is much more pleasurable if the market's high versus low.

But it is what it is, and the penalty for not taking the withdrawal is enormous.

Thankfully I'm good for awhile, but the wife has to start taking the RMDs this year--but not too much $.
But if you don't need it, then you can simply repurchase the same low stocks in a taxable account. Then the price of the market does not matter.

If however you are going spend it, then yes, it's nicer when the market is UP.
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