RMD Question

[Idnar7]

I will be taking my first RMD in 2022. I know I have to take the percentage of my 2021 year end balance. Is there anything you need to do to note that it is RMD? Is the only rule that you have to take at least your percentage sometime during the year? I have my IRA with Fidelity. Do I have them do the withdrawal or can I just do it myself whenever and how often I choose? I only plan to take out the minimum amount for the year. Previously I have only withdrawn for car purchases or home improvements. I would be interested to hear how/how often you take your RMD's. TIA

 

[audreyh1]

I think it’s simply one or more withdrawals which you transfer to a taxable account, and then you declare it as an RMD on your taxes. Automatic scheduled withdrawals are not required, but are an option.

Fidelity has some FAQs on it here: https://www.fidelity.com/learning-center/personal-finance/retirement/making-sense-rmds-video

 

[Car-Guy]

^^^^^^

BTW, the link above didn't work for me. I got this from the Fidelity page following that link -----
Unfortunately, it looks like this page was moved or deleted

I think RMD's are handled differently between IRA's and 401k's. I haven't watched that too closely since rules do change and I'm not there "just yet"

 

[GrayHare]

Upon withdrawals you must specify what % fed and state tax withholding you want from the withdrawal. The IRA custodian will ask you for those numbers. You can choose 0% if you want no withholding.

 

[GalaxyBoy]

I take my (pre-2020) inherited IRA RMD in a lump sum near the end of the year because I use it for my tax withholding. By mid-December I have a good idea of what I'll owe, or I just withhold the safe harbor amount. I also withhold from an inherited annuity I'm withdrawing over five years, which ends next year.

 

[Car-Guy]

Upon withdrawals you must specify what % fed and state tax withholding you want from the withdrawal. The IRA custodian will ask you for those numbers. You can choose 0% if you want no withholding.

But that applies to all IRA withdrawals. Not just RMD's.

 

[audreyh1]

^^^^^^

BTW, the link above didn't work for me. I got this from the Fidelity page following that link -----
Unfortunately, it looks like this page was moved or deleted

Darn it, that link just broke! I find still see it in a search. Weird!

Basically it said that you just set up a withdrawal as a transfer, and had lots of good tips on calculations, deadlines, etc. It was a nice page!

Here is another FAQ page from Fidelity
https://www.fidelity.com/retirement-ira/required-minimum-distribution-faq

This info looks to be the same regarding the mechanics:

How do I take my RMD?

Withdrawing online is the easiest way to take your RMD. To make a one-time withdrawal from your IRA, you'll follow these steps:

• Enter your withdrawal amount and select an account
• Set up a withdrawal date and where your withdrawals are sent
• Choose your tax withholding amounts
• If necessary, sell your investments to make cash available

You can also set up automatic withdrawals for your RMD on a monthly, quarterly, annual or custom schedule.

If you know your RMD amount and you're ready to withdraw now, take your RMD.

If you're ready to withdraw but you don't know your RMD amount, log in to see your estimated RMD amount.

And links are provided for the different options.

 

[Car-Guy]

^^^^^^^
Success

 

[marko]

I think it’s simply one or more withdrawals which you transfer to a taxable account, and then you declare it as an RMD on your taxes. Automatic scheduled withdrawals are not required, but are an option.

So if my regular annual withdrawals exceed my RMD, I shouldn't have to do anything? ( just occurred to me that I'm getting close to this requirement)

 

[audreyh1]

I should have said it went on the form 1040 line for IRA distributions. RMD is simply an annual minimum once you reach 72.

 

[OldShooter]

Withdraw when and how you want. If a person has more than one IRA, the calculation applies to their total value and the resultant amount can be withdrawn from any combination of accounts, even all from the same account. AFIK there is no need to "declare" anything. At least we never have.

We draw whatever $$ we need during the year, then like @GalaxyBoy/Post #5 we pay our safe harbor taxes via withholding in December. At that point if we have not hit our RMDs we just draw what's necessary to comply.

IMO people seem to overthink this. It's really pretty simple.

 

[SecondCor521]

I will be taking my first RMD in 2022. I know I have to take the percentage of my 2021 year end balance. Is there anything you need to do to note that it is RMD? Is the only rule that you have to take at least your percentage sometime during the year? I have my IRA with Fidelity. Do I have them do the withdrawal or can I just do it myself whenever and how often I choose? I only plan to take out the minimum amount for the year. Previously I have only withdrawn for car purchases or home improvements. I would be interested to hear how/how often you take your RMD's. TIA

There is nothing you need to do to note that it is an RMD.

Yes, you just have to withdraw at least that dollar amount at some point during the calendar year. (There is a different rule for the first RMD in this regard.)

You can do it yourself. You can also probably ask Fidelity to set up an RMD service for you and that would probably happen automatically.

I don't take RMDs yet but my Dad does his RMD/12 monthly automatically via Vanguard's RMD service. They recalculate the amount every year because they know his age and automatically make adjustments as required.

Note that the above assumes you're not doing more complicated things like QCDs or Roth conversions. There may be ordering rules in these cases.

 

[Souschef]

NOTE: If you donate to any recognized charity, donate it as a QCD (Qualified Charitable Donation) from your IRA. You are not taxed on that money, and it counts toward your RMD.
The check must be drawn in the name of the charity. I have been doing this for years.

 

[braumeister]

The thing to remember is that distributions can come out of an IRA in a few different ways. Normally, they will go into a taxable account, and the first $X you take out that way will be your required distribution. Of course you can take out much more, but the M in RMD says your amount for the year is the minimum.

Just don't confuse it with Roth conversions, which have nothing to do with your RMD.

QCD donations can be used to distribute directly from the IRA to a charity, and can offset your RMD if you want. So if your RMD for the year is $10K but you want it to be only $5K for tax reasons, you simply donate $5K in a QCD and you're covered.

 

[Idnar7]

Thanks for the great replies. I think I was overthinking it. I will probably check with Fidelity to see if they can take equally from all accounts. I just took a withdrawal for another purpose and it was kind of a chore deciding where to take it from. After watching it grow for years, it is kind of sobering to start withdrawals. Between paying taxes on withdrawals and then paying taxes on any taxable gains, it is taking $10 to give back $3.

 

[Koolau]

One of the advantages of Roth conversion of tIRAs is that you don't have RMDs on Roths. I was able to get to JUST my 401(k) that still needs RMDs.

Someone mentioned noting your RMD on a tax form. Maybe my accountant does that, but I'm not aware of it. I just always assume the IRS "knew" what my RMD amount was (reported by the 401(k) custodian, I assume). If/when they check my 1040, I'm sure they look to see that I DID take at least my RMD from my 401(k). YMMV

 

[Graybeard]

You can aggregate all your IRAs and take the RMD from one of them or any combination of them so long as you take the dollar amount that is required. However, a 401k has somewhat different rules! You can not aggregate multiple 401k RMDs, each must have it's own RMD. You can not aggregate your 401k and IRA. Check with the custodian of your 401k to know what rules apply. I have no idea whether 403b rules are the same as 401k rules.

Does anyone know whether Congress has increased the RMD age to 73?

 

[SecondCor521]

Does anyone know whether Congress has increased the RMD age to 73?

Discussion about raising it to 75, but no action on that yet.

 

[TheWizard]

Actually, the IRS seems to be woefully ignorant about what one's RMD should be, based on numerous stories on the BH forum and elsewhere about folks who neglected to take RMDs for some years.

Raise your hand if you disagree with my statement and have gotten a letter from the IRS stating that you didn't withdraw enough from tax-deferred.

Nonetheless, I recommend we all play by the rules. I'll be taking my RMD monthly starting next month!

 

[TheWizard]

You can aggregate all your IRAs and take the RMD from one of them or any combination of them so long as you take the dollar amount that is required. However, a 401k has somewhat different rules! You can not aggregate multiple 401k RMDs, each must have it's own RMD. You can not aggregate your 401k and IRA. Check with the custodian of your 401k to know what rules apply. I have no idea whether 403b rules are the same as 401k rules.

Does anyone know whether Congress has increased the RMD age to 73?

403(b) RMDs can be aggregated, yes.
I have several of those accounts...

 

[oldtimer]

One of the advantages of Roth conversion of tIRAs is that you don't have RMDs on Roths. I was able to get to JUST my 401(k) that still needs RMDs.

With only 401k tax deferred accounts, you are unable to do QCDs - only possible from IRA. Though maybe you are still working, so you can prevent the need for RMD from that employer's 401k.