PERSonalTime
Recycles dryer sheets
- Joined
- Jan 19, 2014
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- 456
When annual withdrawals are started for RMDs from IRAs or 401ks, are the amounts the same every year or do they changes?
I'm not quite there yet, but yes, this is how I understand it works.Are the RMD% applied to the IRA amount on Dec 31 of the prior year?
Are the RMD% applied to the IRA amount on Dec 31 of the prior year?
Following this. My mom has a few small IRA's and has reached RMD age. Need to make minimum withdraws I assume... How is this handled when funds inside Ira are in annuities ?
I hate to be technical about this, but the amount is only reduced if your spouse is > 10 years younger than you. If the age difference results in your spouse being > 10 years older, the amount is not reduced. Also, the younger spouse must be the sole beneficiary.If the age difference between spouses > 10 years, the amount is reduced (different IRS table).
I hate to be technical about this, but the amount is only reduced if your spouse is > 10 years younger than you. If the age difference results in your spouse being > 10 years older, the amount is not reduced. Also, the younger spouse must be the sole beneficiary.
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Also, if the IRA's are with different financial institutions, you need to instruct ALL the institutions in writing: "Do NOT distribute; I am taking my RMD from another institution" + "Please send my 2014 RMD in the amount of $XXXX. Please withhold XX% for Federal and XX% for State/Local income tax."
If you don't instruct, they will all send you checks based on a presumed allocation, and you don't want that because you will incur taxes on every single check!
Amethyst
Thanks!
So on Jan 1, within one or more IRAs you might be wise to set aside what you have to take out during the year.
Fidelity allows withdrawals "in kind" - you can withdraw securities, mutual fund shares, etc. - not just cash. I'm sure other companies do. The basis is established as the value of the security the day you withdraw it. Equivalent to selling it inside the IRA, withdrawing cash, and buying it again the same day - although in the latter case you have to be careful not to inadvertently run into wash rule violations.
Thanks!
Fidelity allows withdrawals "in kind" - you can withdraw securities, mutual fund shares, etc. - not just cash. I'm sure other companies do. The basis is established as the value of the security the day you withdraw it. Equivalent to selling it inside the IRA, withdrawing cash, and buying it again the same day - although in the latter case you have to be careful not to inadvertently run into wash rule violations.
Is this wash sale possible? I know the opposite is.....if you sell in taxable for a loss and then buy in IRA too soon, you can create a wash sale. But if you sell first in IRA, you can't sell for a loss since there is no basis so buying too soon in taxable would not create a wash sale?
An IRA withdrawal is not treated on schedule D, so "basis" doesn't come into the tax treatment. I don't think you can infer from that that there is no basis, just because it's not treated as a capital gain or loss. I just wouldn't want to inadvertently tiptoe into that area since wash sales take IRAs into account.I can't think of a way to violate a wash sale rule by taking a distribution from an IRA unless you are talking about nondeductible contributions to the IRA (of which we have a few -- very few), but I see how it could be theoretically possible in that particular case. If all the IRA money was tax deductible when it was contributed, then the basis in the IRA investments for the purpose of any sale is $0 and the whole distribution is taxed as ordinary income. Does it matter what you do with the distribution (buy more of the securities you held in the IRA)? I think one of the first tests for the wash sale rule is to have sold at a loss. No basis, no loss.
We have never taken any IRA distributions, so we have no background in that area yet.
All my IRA positions show me a non-zero cost basis. So I don't think it's correct to say there is "no basis" even if you aren't taxed on transactions within the IRA. I would go out of my way to avoid selling at a loss in my IRA and buying outside within 30 days even if I can't use the loss for tax purposes. It just seems to venture too closely into a gray area, even though the IRS ruling involved the opposite scenario. The fact exists that wash sale rules apply across all accounts (including joint) would make me want to keep things very clean by transferring in kind rather than selling in one account and buying in another.
Following this. My mom has a few small IRA's and has reached RMD age. Need to make minimum withdraws I assume... How is this handled when funds inside Ira are in annuities ?
Thanks for that reference!Here is Alan S.' response: Fairmark Forum :: Retirement Savings and Benefits :: Wash Sale Taxable Account & IRA
Re: Wash Sale Taxable Account & IRA
Posted by: Alan S., December 3, 2014 03:08AM
Kaneohe, selling in an IRA does not create a wash sale because there are no capital losses in an IRA that the IRA owner can claim. Custodians who track gains or losses on individual investments in an IRA are just offering that to help the IRA owner determine investment results.
Alan S. posts on the fairmark.com, bogleheads.org, and irahelp.com sites.
It is interesting to me that zillions of us who know much less than he does can come to the same conclusion that he knows more than us and that he is correct even though we know so little.
ymmv, I suppose, but my experience is just the opposite.......they all mail informational material so that you can't yell at them and say you didn't know but the default seems to be if we don't hear from you, we aren't doing anything. .
When I researched SPIAs years ago I remember finding that some IRS rule allows annuitizing to count for RMDs for the amount converted to an annuity. The annuity payment is taxable income just like an IRA withdrawal. You will need to find the rule yourself, consult an accountant, or probably just check through the IRA custodian. Trusting my memory would be foolish.I have no idea how annuities are handled when within an IRA.
However, I wanted to emphasize your mom must take RMD (if they apply) because failure to take RMD is tax bill of 50% of what should have been taken, plus you still have to take it out (and be taxed again on the withdrawl).
It happened to us (getting RMD distro's we didn't ask for and didn't want). We are the only couple we know who have both an RMD'er and an age-different spouse, so again, I can only speak from personal experience.
A.