Koolau
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Oldshooter.
Also, what does the small " t ", in tIRA stand for ? Thanks....
t = "traditional" (as opposed to, for instanace Roth.)
Oldshooter.
Also, what does the small " t ", in tIRA stand for ? Thanks....
Well at its most basic the trick is simply that you can make one payment any time during the year without worrying about calculating anything or keeping track of strict calendar dates. Once you have finished prior year taxes you have your safe harbor number and can make the payment.... I'll stick with the estimated tax payments rather than a late year withdrawal that might push me over the ACA cliff. ...
I know this HAS TO be on here but I could not find it.
By when/how I mean once a year, quarterly, monthly etc. Any particular reason one is better than another?
There are two different steps:I'm planning to take mine out either monthly or quarterly which would be like dollar cost averaging. I'd hate to wait until the end of the year and have to take the whole yearly RMD during a particularly down market.
And conversely, you can withdraw from your IRA, but invest it in the same thing in your taxable account if you don't want to be selling in a down market.There are two different steps:
1. Selling something in anticipation of a withdrawal,
2. Withdrawing the funds from the IRA.
They don’t have to be done at the same time. You can set aside funds for withdrawal early in the year, but wait until late in the year to withdraw them.
I have a spreadsheet to schedule my RMD withdrawals during the year. Here are how mine work:
Quarterly for estimated tax payments
Birthday gifts to our sons J,J,A,S
Charitable (QCD) gifts at certain times during the year
I have attached a sample I created for someone else here. It also calculates your RMD
1. Everything is done after my visit with my tax prep guy in February.
2. I am doing 12 QCDs in 2021 to use up most of my RMD.
3. A $2500 RMD will be done before March 01. Estimated taxes sent on March 31.
4. Roth conversion will be done before March 01. Estimated taxes will be taken from taxable account and sent to IRS and Colorado on March 31.
I look forward to the day when our tIRAs contain only enough money for QCDs.
This is true for the lower point if you are reinvesting or withdrawing shares in kind and paying taxes from cash or after tax funds.And conversely, you can withdraw from your IRA, but invest it in the same thing in your taxable account if you don't want to be selling in a down market.
Given a choice, you really would rather be withdrawing from your IRA at a lower point than a higher point, to reduce taxes.
No tax difference this year, but any interest you make between selling and withdrawing will eventually be taxed at the regular income rate.This is true for the lower point if you are reinvesting or withdrawing shares in kind and paying taxes from cash or after tax funds.
But from a tax standpoint you are still withdrawing the same amount of $$ as required by the RMD, so no tax difference during the withdrawal year that I can see.
WATCH OUT.
Information I had received from Schwab said that I had to take my RMD BEFORE any Roth conversion. Otherwise, it causes some tax problem.
Here is a source I found online that says the same thing.
https://lawrencefinancialplanning.com/blog/roth-conversion-faq
3. CAN I DO ROTH CONVERSIONS AFTER AGE 72 WHEN I START TAKING RMDS?
Yes, you can do Roth conversions in a year where you also take required minimum distributions (RMDs). There is no age limit for Roth conversions. The only thing that changes is that the RMD must be made first, then any remaining distributions can be Roth conversions if you wish.
https://lawrencefinancialplanning.com/blog/roth-conversion-faq
3. CAN I DO ROTH CONVERSIONS AFTER AGE 72 WHEN I START TAKING RMDS?
Yes, you can do Roth conversions in a year where you also take required minimum distributions (RMDs). There is no age limit for Roth conversions. The only thing that changes is that the RMD must be made first, then any remaining distributions can be Roth conversions if you wish.
WATCH OUT.
Information I had received from Schwab said that I had to take my RMD BEFORE any Roth conversion. Otherwise, it causes some tax problem.
Here is a source I found online that says the same thing.
https://lawrencefinancialplanning.com/blog/roth-conversion-faq
3. CAN I DO ROTH CONVERSIONS AFTER AGE 72 WHEN I START TAKING RMDS?
Yes, you can do Roth conversions in a year where you also take required minimum distributions (RMDs). There is no age limit for Roth conversions. The only thing that changes is that the RMD must be made first, then any remaining distributions can be Roth conversions if you wish.
https://lawrencefinancialplanning.com/blog/roth-conversion-faq
3. CAN I DO ROTH CONVERSIONS AFTER AGE 72 WHEN I START TAKING RMDS?
Yes, you can do Roth conversions in a year where you also take required minimum distributions (RMDs). There is no age limit for Roth conversions. The only thing that changes is that the RMD must be made first, then any remaining distributions can be Roth conversions if you wish.
I'm not 100% sure, but I don't think the IRS imposes any ordering rules on RMDs vs. Roth conversions. Certainly one is required to take one's RMD each year, but I think it's perfectly fine to intermix and order RMDs and Roth conversions any which way within a tax year.
If I'm wrong, I'd like to see a pointer to an actual IRS publication or instruction that says otherwise. I haven't heard of one yet.
I'm not 100% sure, but I don't think the IRS imposes any ordering rules on RMDs vs. Roth conversions. Certainly one is required to take one's RMD each year, but I think it's perfectly fine to intermix and order RMDs and Roth conversions any which way within a tax year.
If I'm wrong, I'd like to see a pointer to an actual IRS publication or instruction that says otherwise. I haven't heard of one yet.
Ok... here’s another “expert” who indicates that you must take the RMD >>BEFORE>> doing a Roth conversion. But he provides additional explanation. Paraphrasing here: In IRS logic, your traditional IRA isn’t “yours.” It’s partially yours, but some of it is “theirs.” Once you’re subject to RMDs, they want their cut before you do anything else with that money. Continuing that logic, you aren’t eligible to convert those funds to a Roth, because you hadn’t paid them their cut. That makes your conversion an “excess” contribution to the Roth.
But this expert didn’t note a particular IRS sub paragraph, so feel free to substitute your ‘opinion’ instead. BTW the penalty for that ‘excess contribution’ is only 6%, so no big deal, right? Yeah, it’s only 6%, but that’s PER YEAR that the excess remains in your Roth.
Webpage https://rodgers-associates.com/blog/are-roth-conversions-right-for-people-over/
The first dollars taken from an IRA after you reach age 70‑½ are deemed by the IRS as going toward the RMD. Therefore, you must distribute the RMD before any amount of your IRA is converted to a Roth. Failure to do so could result in an excess contribution to a Roth IRA. The IRS levies a 6% penalty for each year this money remains in the Roth IRA.
Everything I've read is consistent that you have to take the RMD before you can do a conversion.
Here is a good explanation, with references to the code:
Roth Conversion: Take Your Required Minimum Distribution Out First