RMD Sanity Check

[eytonxav]

This seems pretty simple, but when the government is involved one never knows. RMD’s will hit for me for the first time this year, as I turn 70 in mid June, so I am assuming I will need to take my required RMD. As I understand it, the required minimum distribution would be my 2018 end of year IRA balances divided by 27.4. Is that correct? I realize I have until April of 2020 to take the distribution, however, since we live off my IRA I will take the full distribution throughout 2019 starting this month. DW is 5 years younger than me, so the 27.4 comes from the universal life table for a 70 YO. I also believe the distribution only needs to come out of one of my several IRA accounts.

 

[Dtail]

Correct on all your points. See below for the IRS Distribution table by age.

https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf

 

[youbet]

This seems pretty simple, but when the government is involved one never knows. RMD’s will hit for me for the first time this year, as I turn 70 in mid June, so I am assuming I will need to take my required RMD. As I understand it, the required minimum distribution would be my 2018 end of year IRA balances divided by 27.4. Is that correct? I realize I have until April of 2020 to take the distribution, however, since we live off my IRA I will take the full distribution throughout 2019 starting this month. DW is 5 years younger than me, so the 27.4 comes from the universal life table for a 70 YO. I also believe the distribution only needs to come out of one of my several IRA accounts.

If you have one IRA custodian who you like, you might consider consolidating there. Then that custodian will do all the calculations and keep track of your distributions for you.

I consolidated a couple of IRA's and my 401k to a single rollover IRA at Schwab. Now, instead of rounding it all up myself, Schwab provides me with the RMD amount and then keeps track of my withdrawals as I go through the year.

They also do a great job with qualified charitable distributions (which become part of your RMD).

I'm sure any of the other borkerage houses such as Fido, Vanguard, etc., would do the same.

 

[eytonxav]

If you have one IRA custodian who you like, you might consider consolidating there. Then that custodian will do all the calculations and keep track of your distributions for you.

I consolidated a couple of IRA's and my 401k to a single rollover IRA at Schwab. Now, instead of rounding it all up myself, Schwab provides me with the RMD amount and then keeps track of my withdrawals as I go through the year.

They also do a great job with qualified charitable distributions (which become part of your RMD).

I'm sure any of the other borkerage houses such as Fido, Vanguard, etc., would do the same.

I have some lower cost funds elsewhere that are not available on Fidelity, so for the time being will not go to a single firm.

 

[youbet]

I have some lower cost funds elsewhere that are not available on Fidelity, so for the time being will not go to a single firm.

Fidelity allows non-Fidelity funds to be held in accounts there, no? For example, my biggest holdings at Schwab are Vanguard funds.

 

[gerntz]

The RMD is the first dollars you take out each year till you reach the required amount. If you use that up before you reach 70.5, you won't be able to make QCD's - if you make monetary donations of any kind. QCD's are the best kind of $ giving as they reduce your income.

 

[youbet]

The RMD is the first dollars you take out each year till you reach the required amount. If you use that up before you reach 70.5, you won't be able to make QCD's - if you make monetary donations of any kind. QCD's are the best kind of $ giving as they reduce your income.

I'm confused by this. Last year, DW gave some significant money to her deceased DB's alma mater to have his name on a memorial. She did it before we withdrew her RMD. The QCD she gave to the college reduced the amount of RMD dollar for dollar. That is, we wound up with our income reduced by the amount of the donation. Schwab tracked it all. Yes, QCD's are a good way to give.

Are you saying something different?

 

[RunningBum]

Fidelity allows non-Fidelity funds to be held in accounts there, no? For example, my biggest holdings at Schwab are Vanguard funds.

But can you hold Vanguard Admiral funds at Schwab? Some admiral funds have ETF equivalents with the same expense %, but some do not. I suspect something similar is happening with the OP.

 

[RunningBum]

I'm confused by this. Last year, DW gave some significant money to her deceased DB's alma mater to have his name on a memorial. She did it before we withdrew her RMD. The QCD she gave to the college reduced the amount of RMD dollar for dollar. That is, we wound up with our income reduced by the amount of the donation. Schwab tracked it all.

Are you saying something different?

You did it in the correct order. gerntz is saying, don't fulfill your RMD with withdrawals, and then try to take QCDs. That would be the wrong order. Do your QCDs first, up to the RMD limit, and then take any withdrawals needed to satisfy the RMD.

 

[youbet]

But can you hold Vanguard Admiral funds at Schwab?

While you couldn't in the past, you can now. Just bought some VTSAX the other day when the market dropped.

Thanks for the explanation/confirmation ref the QCD procedure. I've already asked DW to get her wishes for 2019 written down. Schwab's system for doing QCD's is easy enough that even a long list of small donations is easy. (I assume all the major brokerages would be too.) It's nice that Uncle has provided a way for geezers to give and get a tax benefit. Since we'll be taking the standard deduction, QCD's are the only way I guess.

 

[gerntz]

I'm confused by this. Last year, DW gave some significant money to her deceased DB's alma mater to have his name on a memorial. She did it before we withdrew her RMD. The QCD she gave to the college reduced the amount of RMD dollar for dollar. That is, we wound up with our income reduced by the amount of the donation. Schwab tracked it all. Yes, QCD's are a good way to give.

Are you saying something different?

DW did correctly - which I tried to say. Guess my word choices weren't very good.

 

[eytonxav]

Fidelity allows non-Fidelity funds to be held in accounts there, no? For example, my biggest holdings at Schwab are Vanguard funds.

Yes, but not Vanguard Admiral

 

[youbet]

Yes, but not Vanguard Admiral

You might want to check with them. That was the situation with Schwab too until recently. Vanguard changed their policy allowing Schwab to sell and hold admiral shares. Perhaps they did it for Fidelity too. I noticed that the old minimums for admiral shares went away too. I think Vanguard woke up and realized that the ER's of their non-admiral shares were no longer competitive.

You can buy VTSAX at Schwab with only a $3k minimum on the initial purchase and $1 on subsequent purchases.

 

[youbet]

DW did correctly - which I tried to say. Guess my word choices weren't very good.

I got it now. Thanks!

 

[kaneohe]

The RMD is the first dollars you take out each year till you reach the required amount. If you use that up before you reach 70.5, you won't be able to make QCD's - if you make monetary donations of any kind. QCD's are the best kind of $ giving as they reduce your income.

Intentionally or not,you did make one very important point: you cannot make a QCD until you are 70.5 y.o................not the year you turn 70.5, the day you turn 70.5. However, withdrawals in the year you turn 70.5 are considered part of the RMD even before you turn 70.5.

Suppose you turn 70.5 in July 2019 and your RMD is 10K. In Jan you withdraw 10K. That is considered part of your RMD which you have satisfied for 2019. You then withdraw 5K in June for a QCD.......that is not allowed since you are not yet 70.5 so you won't be able to "deduct" it from your IRA withdrawals. You then withdraw 7K in Aug for a QCD. That is allowed .....
however you have now withdrawn your RMD in Jan and also your additional QCD so have withdrawn more than necessary.

A more efficient way is to take your QCD before you meet your RMD for the year. You don't have to take it first.........just take it before you meet your RMD. That way the QCD counts as part of the RMD and you will have minimized the withdrawals from your IRA.

Sometimes too few words are misleading and too many are confusing. Hopefully there's a happy middle..................

 

[gerntz]

Intentionally or not,you did make one very important point: you cannot make a QCD until you are 70.5 y.o................not the year you turn 70.5, the day you turn 70.5. However, withdrawals in the year you turn 70.5 are considered part of the RMD even before you turn 70.5.

Suppose you turn 70.5 in July 2019 and your RMD is 10K. In Jan you withdraw 10K. That is considered part of your RMD which you have satisfied for 2019. You then withdraw 5K in June for a QCD.......that is not allowed since you are not yet 70.5 so you won't be able to "deduct" it from your IRA withdrawals. You then withdraw 7K in Aug for a QCD. That is allowed .....
however you have now withdrawn your RMD in Jan and also your additional QCD so have withdrawn more than necessary.

The August distribution is not a QCD - as you describe it. QCD is no longer possible. It's just another IRA distribution since he's over the 10K RMD already.

 

[kaneohe]

The August distribution is not a QCD - as you describe it. QCD is no longer possible. It's just another IRA distribution since he's over the 10K RMD already.

QCDs are allowed up to 100K/yr. Not many have have RMDs that large. It just means that the "deduction" for contributions that large are allowed from the TIRA.

 

[kaneohe]

https://ttlc.intuit.com/questions/4137718-can-a-qcd-be-greater-than-the-rmd

can a qcd be greater than the rmd
I made an qcd this year which was less than my rmd then I withdrew the rest for the rmd Can I take any additional QCD? I know I have to pay taxes on the second withdrawal


ANSWER
3 people found this helpful

You can use a QCD to satisfy your RMD for the year. A QCD can exceed your RMD amount for the year as long as it does not exceed the $100,000 annual limit.