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Need Alternate RMD strategy
Old 05-06-2017, 07:17 PM   #1
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Need Alternate RMD strategy

I will not complain, as my IRA's have done very well. I will be 79 this month, and will have to take an RMD of 20K to 25K this year. This pushes me into the 25% bracket, along with making 85% of my SS taxable.
I am looking for any alternate methods to try to minimize the bite.
I looked at Roth conversions, but they can only be done after you take the RMD, so that is not an option.
Seriously I am very impressed with the depth of knowledge in this forum, and am looking forward to your words of wisdom.
Thank you
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Old 05-06-2017, 08:06 PM   #2
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If you donate money to charity, can use RMD funds to donate. Qualified Minimum Distributions (QMD) are not taxable.
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Old 05-06-2017, 08:07 PM   #3
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Originally Posted by Souschef View Post
I will not complain, as my IRA's have done very well. I will be 79 this month, and will have to take an RMD of 20K to 25K this year. This pushes me into the 25% bracket, along with making 85% of my SS taxable.
I am looking for any alternate methods to try to minimize the bite.
I looked at Roth conversions, but they can only be done after you take the RMD, so that is not an option.
Seriously I am very impressed with the depth of knowledge in this forum, and am looking forward to your words of wisdom.
Thank you
I'm in the exact same boat that you are with RMD pulls causing SS being taxed at 85% and ending up in the 25% bracket. ROTH conversions do me no good either.

This year we will have a ton of medical deductions to soften the blow (expensive dental, DW's prescription costs, insurance, medical equipment not covered by Medicare).
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Old 05-06-2017, 08:12 PM   #4
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QMDs and deductions are about the only way. If you believe deductions are going away with tax reform, you might advance any optional medical costs into the current year.
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Old 05-06-2017, 08:24 PM   #5
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QMDs and deductions are about the only way. If you believe deductions are going away with tax reform, you might advance any optional medical costs into the current year.
I do use QCD's (Qualified Charitable Deductions) to ease the burden a bit. I would love to find a way to pay for my Angel Flights that way.
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Old 05-07-2017, 06:39 AM   #6
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How much over the 25% threshold will you be? If $3,000 or less, could you do some tax loss harvesting to generate a $3,000 loss? Given the regularity of RMD's though this is a problem you are likely to have every year going forward. You must have been gradually creeping closer to this threshold in current and past years.


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Old 05-07-2017, 08:35 AM   #7
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How much over the 25% threshold will you be? If $3,000 or less, could you do some tax loss harvesting to generate a $3,000 loss? Given the regularity of RMD's though this is a problem you are likely to have every year going forward. You must have been gradually creeping closer to this threshold in current and past years.

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Thank you for the suggestion. However, the MFJ 25% rate is for incomes $75,301 - $151,900, and I am about in the middle of that range.
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Old 05-07-2017, 10:08 AM   #8
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I think you're just going to have to suck it up. Thanks to a good pension, RMDs will eventually push us into the 28% bracket. Nothing for it apart from QCDs but to pay up and remind ourselves it's a good problem to have.
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Old 05-07-2017, 10:54 AM   #9
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I'm surprised that you don't have to take RMD until 79. I thought it's 70.5 for everybody. Is that a typo?
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Old 05-07-2017, 11:01 AM   #10
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think you're just going to have to suck it up.I Thanks to a good pension, RMDs will eventually push us into the 28% bracket. Nothing for it apart from QCDs but to pay up and remind ourselves it's a good problem to have.
Agreed.

This is our first year of RMD's and, indeed, the pleasure of delaying taxes through qualified plan contributions over many years is now being replaced by the agony of higher taxes in retirement. Saving in IRA's, 401k and 403b was our choice so the situation is of our own making. We didn't really plan on being in the 28% bracket while retired, but as you say, there are worse problems.

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Old 05-07-2017, 11:52 AM   #11
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I'm surprised that you don't have to take RMD until 79. I thought it's 70.5 for everybody. Is that a typo?
He didn't say it was his first RMD... Just that it was expected to be a big one and he was getting hit with higher taxes because of the size.
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Old 05-07-2017, 11:52 AM   #12
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Originally Posted by Souschef View Post
Thank you for the suggestion. However, the MFJ 25% rate is for incomes $75,301 - $151,900, and I am about in the middle of that range.
I have not figured out the numbers to this idea, but compared to 25% tax marginal tax rate and 85% SS, maybe it works depending upon your IRA values:

Go the opposite way, take out extra when at the RMD time, a lot extra to put you to the top of the 25% bracket.

You can throw the extra into a ROTH (conversion) so it does not cause further problems.

This might help, if it reduces your IRA's to a level after doing it a few years, where the RMD does not trigger your SS to be 85% taxable.
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Old 05-07-2017, 02:31 PM   #13
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I am reminded of the old saying "RMD is an obligation to pay taxes, not an obligation to spend it all."


If anyone comes up with a viable solution to the RMD puzzle, please announce it here.
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Old 05-07-2017, 03:08 PM   #14
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Originally Posted by Souschef View Post
I will not complain, as my IRA's have done very well. I will be 79 this month, and will have to take an RMD of 20K to 25K this year. This pushes me into the 25% bracket, along with making 85% of my SS taxable.
I am looking for any alternate methods to try to minimize the bite.
I looked at Roth conversions, but they can only be done after you take the RMD, so that is not an option.
Seriously I am very impressed with the depth of knowledge in this forum, and am looking forward to your words of wisdom.
Thank you
Isn't your RMD this year based on the FMV of the IRA at Dec 31, 2016? How can it be a range ($20-25)? Wouldn't it be a single number?
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Old 05-07-2017, 05:55 PM   #15
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I have not figured out the numbers to this idea, but compared to 25% tax marginal tax rate and 85% SS, maybe it works depending upon your IRA values:

Go the opposite way, take out extra when at the RMD time, a lot extra to put you to the top of the 25% bracket.

You can throw the extra into a ROTH (conversion) so it does not cause further problems.

This might help, if it reduces your IRA's to a level after doing it a few years, where the RMD does not trigger your SS to be 85% taxable.
Looks like I'll pay 25% bracket for the remainder of my life - could even get to 28% IF I live so long (because RMD's % goes up each year AND the investment results might also do very well.) i've been trying to figure how to deal with RMDs but I've always let a tax "guy" figure my taxes. What are the pitfalls to either taking extra money and investing it or (more likely) converting the amount above RMDs to Roth IRAs?

1. I think I have to look out for increased Medicare premiums - and that's if I go $1 over the limit, right?

2. I need to watch that some "extra" or unexpected source of income doesn't put me into the 28% bracket though that's only on the amount over the range.

3. Other??

All of this in aid of reducing just the 85% taxable (a bit) on SS at some point in the future? Is that correct? It might not be worth the pitfalls for that.

MY thinking was that I could insure never getting to the 28% bracket by taking extra beyond RMDs so that my 401(k) balance will go down - even if results are good. That way, when the RMD % gets higher, I'll still be in the 25% bracket. Sound reasonable?? Thanks for any assistance.
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Old 05-07-2017, 06:00 PM   #16
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Isn't your RMD this year based on the FMV of the IRA at Dec 31, 2016? How can it be a range ($20-25)? Wouldn't it be a single number?
I think we should stop nit picking. It means he does know the exact number.
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Old 05-08-2017, 05:33 AM   #17
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Adjusted gross income (AGI) drives all penalties, etc, so attempts to decrease line 37 is the focus. Here is an article in Forbes from 2/28/17 that may help some on this subject. It may not drop your income by $20-25,000 but $3,000 here and $3000 there, may add up to real money for some.

https://www.pressreader.com/usa/forb...81638189954312
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Old 05-08-2017, 11:35 AM   #18
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One other thing to keep in mind. Look at what happens to the tax situation when one of you dies. MFJ goes to Single and the tax bracket can sky rocket. This may be a good reason to do Roth conversions up to the top of your current bracket.
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Old 05-08-2017, 11:55 AM   #19
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Originally Posted by Fedup View Post
I'm surprised that you don't have to take RMD until 79. I thought it's 70.5 for everybody. Is that a typo?
I did take it at 70.5, but it was not that much of an issue then. What has happened in the ensuing years with the bull market, my IRA has tripled in value. Even after I take my RMD, the value has been increasing.
As said, I am not complaining, just looking for other strategies.
Io the poster who pointed out what happens if one of us dies, It will probably be a wash because one SS and one pension would go away, so the AGI would decrease considerably.
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Old 05-08-2017, 12:12 PM   #20
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I did take it at 70.5, but it was not that much of an issue then. What has happened in the ensuing years with the bull market, my IRA has tripled in value. Even after I take my RMD, the value has been increasing.
As said, I am not complaining, just looking for other strategies.
Io the poster who pointed out what happens if one of us dies, It will probably be a wash because one SS and one pension would go away, so the AGI would decrease considerably.
Nice problem to have. This is one reason I'm not taking SS until 70. I've been trying to convert my husband's IRA to Roth IRA before he has to take RMD.
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