IRA and 401K deduction

[donheff]

Another thread made me start thinking about the timing of RMD withdrawal. I currently have my TSP withdrawals come as monthly payments since we use them to fund current expenses. But when DW's mega RMDs kick in we will be in a different boat. We will be dumping them into taxable investment accounts, not spending them.

If we take them as a lump sum in December and have tax withheld it seems like we would be up a bit on the growth in the funds that would otherwise be languishing at IRS if we withdrew (and paid the taxes) earlier. But those additional earning will eventually be taxed at income rates. Has anyone run numbers on this to see if it is better to take them at the end of the year?

 

[pb4uski]

You could split the baby... segregate RMD between the amount needed to cover taxes and the excess. Take the excess out at the beginning of the year and reinvest in taxable account. Then in December, do the amount for taxes wih 99% or 100% withholdings.

 

[Car-Guy]

You could split the baby... segregate RMD between the amount needed to cover taxes and the excess. Take the excess out at the beginning of the year and reinvest in taxable account. Then in December, do the amount for taxes wih 99% or 100% withholdings.

Exactly what I have been planning to do when my time comes. (soon) Why pay the tax almost a year early!

 

[RunningBum]

I think you meant Distribution, not Deduction, in the title, right?

 

[donheff]

I think you meant Distribution, not Deduction, in the title, right?

I did but I don’t see any way to edit titles.

 

[levindb]

Slight difference in my process. I do monthly distribution/transfer to a taxable account. This will satisfy RMD requirements. I then have large withholding payments in December. Let it grow, let it grow, let it grow. We do not make estimated quarterly payments.

Separately, I have monthly transfers from my taxable account to my bank checking account to handle spending/bills. Taxable account may grow a bunch if RMD's exceed our needs, or we may have to Blow That Dough to bring the taxable account down a bit.

 

[street]

I will be watching your post to see what the majority has to say in the poll. I beleive I have read before it is better to take it in Jan. each year for tax purposes and so the distribution and taxes for the year make it less confusing etc.. I would like to also hear to hear the reason why for when you take RMD.