My first RMD will be in 2025. Lump sum withdrawal on 1/2/2025 or 12/31/2025?

[Maximus]

I will be doing my first RMD in 2025. I do not need the money. I plan to do a lump sum withdrawal from the SP500 fund in my IRA. Would it make any fiscal difference withdrawing it January 2nd vs December 31st?

 

[GrayHare]

Yes, if the share price of your SP500 fund changes during 2025. Get our your crystal ball so you can sell at a high price.

 

[jebmke]

I would do it in December but not the last day. I'd use it to withhold taxes and reduce my estimated tax payments during the year.

 

[Al18]

I recommend not buying or selling within 2 weeks from a quarter end. There seems to be a lot of market activity.

 

[OldShooter]

We pay no attention. During the year we draw cash as needed. If we haven't hit RMD after we pay our estimated taxes by withholding in December we'll draw a little more to bring withdrawals up to the requirement.

 

[rk911]

We take our RMDs in early December and donate them to a QCD.

 

[TheWizard]

I take 1/12 of my RMD on the 15th of each month.
It's actually Deferred Income, you see.
I got paid monthly back in the day, so this goes along the same path as previously.

Now do I actually *need* my RMD money on top of my SS and pension/annuity income?
Or do I actually *need* my SS income on top of my RMD and pension/annuity income?

The answer to these silly questions matters not a whit. My goal in life at this point is to become an increasingly wealthy bastard, so the more Ordinary Income the merrier...

 

[audreyh1]

A bunch of different ways to handle this. Lots of different factors come into play. You’ll figure out what works for you.

We’ll do any QCDs first. We’ll probably always have enough to meet RMD in cash or similar inside the IRA so market timing won’t come into it.

 

[RetireBy90]

If you are going to move RMD to after tax account, then gains realized could be taxed at a lower rate. If you wait for Dec then you get the money growing o e year tax deferred.
I had an inherited IRA and took RMDs in Dec to leave it earning investment returns as long as possible.
Now I think it is of little matter

 

[TheWizard]

My RMD situation is a bit complicated in that I started out with all my tax-deferred money in my 403(b).
But you can't do QCDs from a 403(b), only from a tIRA.
So I've been moving a portion of funds to my newish tIRA at Vanguard for that purpose.

I'm not quite sure what my continuing plan will be...

 

[disneysteve]

I do my RMD as a lump sum late in the year and use it for taking care of taxes for the year. I would not wait until 12/31 just in case there's any delay and it doesn't get processed until 1/2 in which case you'd be penalized for not taking it in 2024. Give yourself a little wiggle room, at least a few days.

 

[TheWizard]

If you are going to move RMD to after tax account, then gains realized could be taxed at a lower rate. If you wait for Dec then you get the money growing o e year tax deferred.
I had an inherited IRA and took RMDs in Dec to leave it earning investment returns as long as possible.
Now I think it is of little matter

This seems backwards.
Investment returns (Qualified Dividends) are taxed as Ordinary Income when withdrawn from a tax-deferred account.
They are taxed at a lower rate in a taxable account.

Why don't you rethink this and get back to us...

 

[RunningBum]

I would do it early in the year. More likely than not it will grow, and you'd rather have that growth in taxable (at LTCG rates eventually) than in the tIRA. And, if you happen to die during the year, the RMD is one more complication for your executor and/or heirs.

I just don't see a compelling reason to wait, unless you are really into market timing and think the market is high early in the year.

 

[RunningBum]

Thought of one reason. If you plan to do QCDs, you should probably wait on RMDs until you decide for sure that you are and how much.

OK, 2 reasons is that you can do withholding on your RMD (correct?) and you might wait until December to see how much to withhold based on your other taxable activity. Withholding is assumed to be done evenly throughout the year even if you do it in December.

So I spoke too early, but gave reasons to do it early or late.

 

[Maximus]

Thanks everyone for all the help. I think I will go with RunningBums advice. Will take a lump sum in January . Don’t really need the money for the foreseeable future so will reinvest the rmd back into a taxable SP500 fund at Schwab.

 

[kgtest]

I would do it right away. Maybe not the first day of market open, but just get it over with. Then, put the dough in your broker and the gains will help pay the tax.

 

[audreyh1]

Thanks everyone for all the help. I think I will go with RunningBums advice. Will take a lump sum in January . Don’t really need the money for the foreseeable future so will reinvest the rmd back into a taxable SP500 fund at Schwab.

You may be able to take the RMD in kind - i.e. shares of whatever in your IRA get transferred to your after tax account and you would pay taxes from other funds later. Fidelity allows this. Schwab probably does too. The cost basis of the shares are marked to that day’s price. You just need to make sure the total meets your RMD or maybe exceeds slightly since it’s variable.

 

[Andre1969]

Instead of taking it at a lump sum either early or late in the year, would there be any advantage to breaking it up, and, say, taking out 1/12 of it each month?

I have three inherited IRAs. The first two came from my Grandmom and my Dad, and RMDs are under the old system where it's based on my own life expectancy. I think they're designed to zero out when I hit 84. They're not very large amounts, so the RMDs are only around $125-150 for Grandmom's IRA, and maybe $2100 for Dad's. I take both of them in December, and they just go into my checking account.

But, the one from my uncle is one of those 10-year plans, where you don't have a set RMD schedule, but have to have it completely zero'ed out at the end of the 10th year. 2024 is the first year, and I was going to start withdrawing this year, until a Fidelity advisor mentioned something. She said that if I'm planning to retire soon, I might want to hold off on taking RMDs until I actually retire, to lower the tax rate. I'm planning to retire in April 2025, so I figured I'd hold off a year.

My uncle's IRA is a bit more substantial, well to me at least. Tentatively, I'm planning to pull out something like $25-30K. My plan is to pull out 1/12 of that monthly, rather than all at once. Dollar-cost out of it, for lack of a better phrase. I'm not all that good at market timing, so I figured doing this would equalize things out a bit, overall.

 

[Dtail]

I take the RMD for my mom at the end of the year, so I can play with the withholding for the year.

 

[athena53]

A bunch of different ways to handle this. Lots of different factors come into play. You’ll figure out what works for you.

We’ll do any QCDs first. We’ll probably always have enough to meet RMD in cash or similar inside the IRA so market timing won’t come into it.

This thread is great timing. I don't have to take RMDs till 2026 but just started looking at the numbers. I have abut $2 million in after-tax and $1.8 million in non-Roth IRAs. The RMD on that is close to $70,000. I played with the idea of QCDs to lighten the impact and it's minimal. I itemize because state and local taxes alone are $10K, the standard deduction for a single is $12K and I donate a lot to charity. If I make, say, $40K as QCDs, that reduces my deductions by the same amount so it's a wash. It does keep $40K out of my MAGI, which is used to determine IRMAA surcharges, but the impact on IRMAA looks to be under $1,000/year.

I literally lost sleep over this last night and was up at 4 AM. I have been reminding myself that I've gotten through far tougher things in my life and most people would like to have my "problems".

But keep the ideas coming. I like the idea of doing an RMD early in the year since any potential gains in the after-tax will be taxed at a lower rate.

 

[GalaxyBoy]

I donate my small RMD to the IRS and my state each year to avoid paying estimated taxes.

 

[levindb]

I prefer to take RMDs at the end of the year once I have done my rough guess at fed/state taxes...end of Nov/early Dec. I take a portion of the RMD as withholding directly to the IRS and I overpay by a few hundred $$ to make sure I get a refund. By doing this, I pay no estimated taxes during next year. I have no mutual funds or bond funds in after tax accounts that may have significant distributions at the end of the year...so my tax estimate is fairly accurate. This also allow me to calculate any Roth conversions to fill my tax bracket.
I do not like paying taxes, so I only pay them once/year vs 4 times each year.

 

[Golden sunsets]

I do my RMD as a lump sum late in the year and use it for taking care of taxes for the year. I would not wait until 12/31 just in case there's any delay and it doesn't get processed until 1/2 in which case you'd be penalized for not taking it in 2024. Give yourself a little wiggle room, at least a few days.

Ditto. We also have a substantial component in our IRA's that is in a bond ladder designed so that the bonds mature in approximate amounts equal to our RMD's. That was way, we are not forced to sell equities at an inopportune time.

 

[Dtail]

I prefer to take RMDs at the end of the year once I have done my rough guess at fed/state taxes...end of Nov/early Dec. I take a portion of the RMD as withholding directly to the IRS and I overpay by a few hundred $$ to make sure I get a refund. By doing this, I pay no estimated taxes during next year. I have no mutual funds or bond funds in after tax accounts that may have significant distributions at the end of the year...so my tax estimate is fairly accurate. This also allow me to calculate any Roth conversions to fill my tax bracket.
I do not like paying taxes, so I only pay them once/year vs 4 times each year.

Same here but specifically make sure there is a small amount owed, as in the past the refund can be delayed, so it takes away one more potential frustration in life.

 

[Dalton]

I have an Inherited IRA, and I use the RMDs as part of my income. I take a distribution in each of the first 2 quarters, to have the withholding to hopefully cover my planned income for the year (especially including my estimated interest and dividends), so I don't have to mess with quarterly tax payments (I know, I could just do the 110% of last years tax). But, I leave a chunk of the RMD that I'll take distribution of in December so I have the year-end opportunity to withhold a larger or smaller amount as needed to avoid any possible penalty, on the off-chance I have any unexpected income, interest, or dividend "windfalls" in the 2nd half of the year that I need/want to withhold for.