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RMDs and subtracting one - an old wives' tale?
09-30-2019, 05:47 PM
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#1
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2006
Location: Boise
Posts: 7,882
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RMDs and subtracting one - an old wives' tale?
Hi all,
I don't take RMD's yet, but my Dad has for the past 10 years or so.
RMD's are calculated by the 12/31 balance of the year before divided by a divisor. There are a few IRS tables in which you can look up the divisor, depending on the circumstances under which you are taking the RMD.
After the first year, there are two possible ways to get the divisor for the second and subsequent years:
1. Take the previous year's divisor and subtract one. For example, you were 70 last year and used 27.4, so this year you should use 27.4 - 1.0 = 26.4.
2. Look up the new divisor in the applicable IRS table based on the person's current age. For example, you were 70 last year and used 27.4, so this year you are 71 and should use 26.5.
I've seen #1 mentioned multiple times on this board, and I've promulgated it myself. I think it's wrong.
#2 seems to be the way Vanguard does it, and seems to match the IRS instructions for how to calculate it.
Can anyone confirm that method #2 is correct? Does anyone know where method #1 comes from (did it used to be the way it was done?) ?
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
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09-30-2019, 06:15 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,145
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I've never seen the #1 method. I always looked at the tables.
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Retired since summer 1999.
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09-30-2019, 06:18 PM
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#3
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gone traveling
Join Date: Mar 2015
Posts: 3,508
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Quote:
Originally Posted by SecondCor521
1. Take the previous year's divisor and subtract one. For example, you were 70 last year and used 27.4, so this year you should use 27.4 - 1.0 = 26.4.
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This is incorrect.
Quote:
2. Look up the new divisor in the applicable IRS table based on the person's current age. For example, you were 70 last year and used 27.4, so this year you are 71 and should use 26.5.
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This is correct.
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09-30-2019, 06:26 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 26,895
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Quote:
Originally Posted by SecondCor521
....
#2 seems to be the way Vanguard does it, and seems to match the IRS instructions for how to calculate it.
Can anyone confirm that method #2 is correct? Does anyone know where method #1 comes from (did it used to be the way it was done?) ?
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The answer, as always, is either "42" or "it depends".
#1 can be correct, for non-spousal inherited IRA's.
https://www.fidelity.com/building-sa...erited-ira-rmd
Quote:
As a non-spouse beneficiary, you must directly roll over the inherited assets to an Inherited IRA in your own name and use your own age and the IRS Single Life Expectancy Table for calculating the first year RMD. For each year after, you would subtract one year from the initial life expectancy factor.
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-ERD50
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09-30-2019, 06:28 PM
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#5
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Thinks s/he gets paid by the post
Join Date: Apr 2008
Posts: 2,024
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Quote:
Originally Posted by audreyh1
I've never seen the #1 method. I always looked at the tables.
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An inherited IRA from a non-spouse uses method #1. The first year is a table lookup. Subsequent years is previous minus 1.
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09-30-2019, 06:33 PM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2006
Location: Boise
Posts: 7,882
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Thanks all for the clarifications!
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
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09-30-2019, 09:30 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,374
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Quote:
Originally Posted by ERD50
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+1
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If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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10-01-2019, 11:14 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2004
Location: Laurel, MD
Posts: 8,327
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Quote:
Originally Posted by ERD50
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The way I read the bolder statement, you are subtracting 1 from the initial divisor for all subsequent years (eg the divisor doesn’t change after the 2 yr). I know that not what is meant, but .....
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...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
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