RMD in 2024 or 2025? born October 28th, 1951

[kgtest]

Having a debate with my dad. He says his first RMD is not until NEXT year in 2025. But I logged into his Vanguard account and he had a message in his inbox from Vanguard stating his RMD is due in 2024.

Can someone help me out on what the letter of the law is here. I know since he was born second half of 1951 that there is some ambiguity on when he needs to take it.

I know there was a thread on this a little earlier so my apologies for bringing this up again.

 

[Car-Guy]

In his case, he can delay his "first year" RMD for 2024 until 4/1/25. However, if he does that, he must also take his 2025 RMD in 2025 too. Basically making that two withdrawals in 2025, which "may mean" a higher tax bracket and possibly even IRMAA problems, depending on his total taxable income.

 

[kgtest]

In his case, he can delay his "first year" RMD for 2024 until 4/1/25.

Okay. I got ya. So if he delayed it...he would essentially take "2" RMDs in 2025.

1 before April 15th...and one before the end of the year. Correct?

So he would have all of that RMD income included in 2025 taxable vs if he does NOT delay and just takes it this year.

 

[frayne]

In his case, he can delay his "first year" RMD for 2024 until 4/1/25. However, he must also take his 2025 RMD in 2025 too. Basically making that two withdrawals, which "may mean" higher tax brackets and even IRMAA problems

+1 and a 1951 boomer myself taking 1st year of RMDs.

 

[REWahoo]

Okay. I got ya. So if he delayed it...he would essentially take "2" RMDs in 2025.

1 before April 15th...and one before the end of the year. Correct?

So he would have all of that RMD income included in 2025 taxable vs if he does NOT delay and just takes it this year.

Yes, that's how I understand the IRS rules.

 

[VanWinkle]

In his case, he can delay his "first year" RMD for 2024 until 4/1/25. However, if he does that, he must also take his 2025 RMD in 2025 too. Basically making that two withdrawals in 2025, which "may mean" a higher tax bracket and possibly even IRMAA problems, depending on his total taxable income.

+1

 

[Rosie]

Okay. I got ya. So if he delayed it...he would essentially take "2" RMDs in 2025.

1 before April 15th...and one before the end of the year. Correct?

The first before April 1 2025, actually, not April 15. Not a joke.

see https://www.irs.gov/retirement-plan...nt-topics-required-minimum-distributions-rmds

DH turns 73 this year which is why I'm reading up on this.

 

[kgtest]

The first before April 1 2025, actually, not April 15. Not a joke.

see https://www.irs.gov/retirement-plan...nt-topics-required-minimum-distributions-rmds

DH turns 73 this year which is why I'm reading up on this.

True...and probably not at 3:39pm EST on April 14th.

 

[target2019]

"Required beginning date for your first RMD
IRAs (including SEPs and SIMPLE IRAs)
April 1 of the year following the calendar year in which you reach age 72 (73 if you reach age 72 after Dec. 31, 2022)."

That would make for an interesting tattoo. Maybe go with an abbreviated rule.

 

[kgtest]

The first before April 1 2025, actually, not April 15. Not a joke.

see https://www.irs.gov/retirement-plan...nt-topics-required-minimum-distributions-rmds

DH turns 73 this year which is why I'm reading up on this.

I just saw you said April 1st.

I did not know it was actually April 1st, before the tax file deadline.


New question, is the factor he divides by based on age 72 (What he currently is) of 27.4 OR is it based on Age 73 which is how old he will be ending in 2024

Vanguard is apparently using an Age 73 calculation and factor of 27.4 in the RMD reminder confirmation's calculation

 

[SecondCor521]

I just saw you said April 1st.

I did not know it was actually April 1st, before the tax file deadline.


New question, is the factor he divides by based on age 72 (What he currently is) of 27.4 OR is it based on Age 73 which is how old he will be ending in 2024

Vanguard is apparently using an Age 73 calculation and factor of 27.4 in the RMD reminder confirmation's calculation

The factor used is the age the person turns on their birthday in the applicable year. So the applicable year being 2024, and he is turning 73 on his birthday, it would be the age 73 factor, which is 26.5. See page 8 right column of IRS Pub 590-B and Table III at https://www.irs.gov/pub/irs-pdf/p590b.pdf.

(This assumes he's not using the "spouse more than 10 years younger" rule and it's a traditional IRA, which is the most common scenario.)

Vanguard usually gets things right, so I would suggest doublechecking that his birthdate is correct with them and make sure you're reading what they're saying carefully. Although it's also possible that someone at Vanguard forgot to update the code or letter or whatever because the RMD RBD (required beginning date) changed from age 72 to 73 in the past year or two and many folks have noted a decline in Vanguard's customer service.

 

[kgtest]

The factor used is the age the person turns on their birthday in the applicable year. So the applicable year being 2024, and he is turning 73 on his birthday, it would be the age 73 factor, which is 26.5. See page 8 right column of IRS Pub 590-B and Table III at https://www.irs.gov/pub/irs-pdf/p590b.pdf.

(This assumes he's not using the "spouse more than 10 years younger" rule and it's a traditional IRA, which is the most common scenario.)

Vanguard usually gets things right, so I would suggest doublechecking that his birthdate is correct with them and make sure you're reading what they're saying carefully. Although it's also possible that someone at Vanguard forgot to update the code or letter or whatever because the RMD RBD (required beginning date) changed from age 72 to 73 in the past year or two and many folks have noted a decline in Vanguard's customer service.

Vanguard did get it right. It was my ol man who was getting confused since he had heard somewhere about delaying. I re-explained that it would push him up into an unnecessarily higher bracket by doing that, and not just taking it this year. I think I've explained this a few times to him, but he has a lot going on with Grandma recently moving in with him to finish out her sprint.

They had the factor correct as well.

The interesting thing is he did a Roth Conversion this year and it is counting that distribution for the conversion as part of his RMD. Seems strange that would "count" towards the RMD.

 

[TheWizard]

...The interesting thing is he did a Roth Conversion this year and it is counting that distribution for the conversion as part of his RMD. Seems strange that would "count" towards the RMD.

Oh dear, it does NOT.
In fact, you technically need to complete taking your RMD for the year before doing any Roth conversion beyond that...

 

[kgtest]

Oh dear, it does NOT.
In fact, you technically need to complete taking your RMD for the year before doing any Roth conversion beyond that...

This is what I feared. Probably tough to undo the Roth conversion at this point. But he could perhaps just take the RMD next year and then take his RMD for 2025 immediately after and pay the piper on a little extra taxable income.

 

[SecondCor521]

Oh dear, it does NOT.
In fact, you technically need to complete taking your RMD for the year before doing any Roth conversion beyond that...

I know that's what people at Bogleheads say, but I'm not sure I agree with it.

What the law does say (as far as I can tell by reading it) is that if the total distributions from your IRA are not sufficient to meet your RMD in a given year, then the IRS deems that your IRA distributions first go to satisfy the RMD. And RMDs are not eligible to be Roth converted.

So a person with a $20K RMD who does only a $10K Roth conversion would mean that the $10K would be treated as an RMD, and the Roth conversion would not really be a Roth conversion. It would end up (I think) being treated as an RMD followed by a Roth contribution, which would end up being an excess Roth contribution with all the attendant consequences of that: 6% excise taxes, etc. (They'd also be dinged for missing $10K of their $20K RMD, with the 25%/10% excess accumulation penalty.)

If, however, a person has a $20K RMD and does a $10K Roth conversion followed by a $20K regular distribution, then the first $20K is deemed to meet the RMD, and then the remaining $10K is eligible for Roth conversion. So I think it all works out.

Everyone should of course do things properly, but I also think that this is an area that the IRS does not enforce any ordering rules within a calendar year and is an example of Bogleheads arguing about angels dancing on pins.

And OP should of course consult their own qualified tax advisors and not rely on me or any other SGOTI.

 

[Free To Canoe]

Having a debate with my dad. He says his first RMD is not until NEXT year in 2025. But I logged into his Vanguard account and he had a message in his inbox from Vanguard stating his RMD is due in 2024.

Can someone help me out on what the letter of the law is here. I know since he was born second half of 1951 that there is some ambiguity on when he needs to take it.

I know there was a thread on this a little earlier so my apologies for bringing this up again.

He turned 72 in 2023. Must take it in 2023 or as late as April 1, 2024.

 

[kgtest]

"Required beginning date for your first RMD
IRAs (including SEPs and SIMPLE IRAs)
April 1 of the year following the calendar year in which you reach age 72 (73 if you reach age 72 after Dec. 31, 2022)."

That would make for an interesting tattoo. Maybe go with an abbreviated rule.

April 1 of the year following the calendar year, in which you reach age 73.

Is how I read that. Since he reached 72 after December 31 2022 then,

He would need to take it before April 1st of the year following... the year he reached 73. He is still 72 and he turns 73 in October. So he will take it before April 1st, 2025.

Am I misunderstanding this logic? We are in 2024 right? And he is not 73 yet. The year following the year he turns 73 would be 2025.

 

[audreyh1]

He turned 72 in 2023. Must take it in 2023 or as late as April 1, 2024.

No, the ages changed for those turning 72 after 2022.

From 2023 on, RMD starts the year they turn 73. So if this person turns 73 in 2024, that’s their first year and they have up until April 1 of the following year to take their first RMD.

 

[Free To Canoe]

No, the ages changed for those turning 72 after 2022.

From 2023 on, RMD starts the year they turn 73. So if this person turns 73 in 2024, that’s their first year and they have up until April 1 of the following year to take their first RMD.

Thanks for straightening me out. Pub 590b 2022 misled me.

 

[kgtest]

No, the ages changed for those turning 72 after 2022.

From 2023 on, RMD starts the year they turn 73. So if this person turns 73 in 2024, that’s their first year and they have up until April 1 of the following year to take their first RMD.

Got it.