Suggestions for estimating future RMDs

[Koolau]

I was very diligent about converting to Roth to the utmost I could handle, and I'm very glad of it today. The result is that nearly 70% of my total is in Roth, and my Traditional is down to less than 10%.

That lets me make QCD donations that are easily more than whatever RMD I have, so I don't even have to think about it any more.

I'm very jealous. I w*rked at it too, but only got my 401(k) down to about 25% or so of my stash. My tIRAs are long gone, but... I started with most of my stash in qualified money of one sort or another. Too soon old, too late smart. YMMV

 

[marko]

Over the past 19 years I've withdrawn over 100% of my starting RE balance, yet my current IRA balance is now still almost 80% more than my starting balance. Just can't seem to get ahead of it.

I start RMDs next year but my current expenses/withdrawals exceed my RMD requirements.

 

[yclipse]

I created a spreadsheet to do this several years ago, and I have been using it consistently since. You can find it at https://tinyurl.com/RMDmind.

 

[Hermit]

Thank you all for your input and links to the RMD estimators. I have done a very rough initial calculation using these estimators.

Also a big thanks about IRMAA.

Here is my situation. I will turn 73 in early December 2026. I assume I should take my first RMD in 2026 because if I wait to take my first RMD early in 2027 I would then be required to take second RMD before year end 2027? If that is true about taking two RMDs in 2027 I will definitely be subject to IRMAA that year. Each year, thereafter, I would be flirting with possibility IRMAA but hopefully running just a bit below.

I cant stay away from the IRMAA. The break points are a hard thing to predict because you are estimating what the numbers will be in two years. My plan is to stay below an IRMAA break point by enough that I am confident in not going over. I will double up on charitable giving one year if needed to stay below a break point and then add more income the next year by withdrawing above RMD (including the amount I would have contributed to that charity the next year) up to the next break point for the next year if needed so I am always just under a break point. I am not going to give away to charity more than what I think is reasonable just to stay below the first break point. Each break point costs you somewhere around an additional $1500 in annual fees, so it probably won't break your bank.

 

[copyright1997reloaded]

I created a spreadsheet to do this several years ago, and I have been using it consistently since. You can find it at https://tinyurl.com/RMDmind.

Thanks!
I modified the spreadsheet to add a "Yes" "No" option for deferring until 73 for those under 73 currently. https://tinyurl.com/RMDCalc2

 

[yclipse]

You'd have to move the divisors down. There are no RMDs between age 60 and 73.

 

[Koolau]

Over the past 19 years I've withdrawn over 100% of my starting RE balance, yet my current IRA balance is now still almost 80% more than my starting balance. Just can't seem to get ahead of it.

I start RMDs next year but my current expenses/withdrawals exceed my RMD requirements.

Once again, the power of compounding is our friend. I can't seem to outspend my growth.

 

[Koolau]

I cant stay away from the IRMAA. The break points are a hard thing to predict because you are estimating what the numbers will be in two years. My plan is to stay below an IRMAA break point by enough that I am confident in not going over. I will double up on charitable giving one year if needed to stay below a break point and then add more income the next year by withdrawing above RMD (including the amount I would have contributed to that charity the next year) up to the next break point for the next year if needed so I am always just under a break point. I am not going to give away to charity more than what I think is reasonable just to stay below the first break point. Each break point costs you somewhere around an additional $1500 in annual fees, so it probably won't break your bank.

My understanding is that MAGI - used to determine whether you pay IRMAA - has only a few deductions to get to AGI (1040 line 11) and charity is not one of them. Charity is used after AGI to get to taxable income IIRC. It's certainly true that you can use charity to stay below a given tax-bracket break-point.

 

[Gumby]

My understanding is that MAGI - used to determine whether you pay IRMAA - has only a few deductions to get to AGI (1040 line 11) and charity is not one of them. Charity is used after AGI to get to taxable income IIRC. It's certainly true that you can use charity to stay below a given tax-bracket break-point.

The one exception, I believe, are QCDs, which are above the line deductions (i.e. - they reduce MAGI).

 

[Route246]

I have this plan to have everything combined into my Vanguard IRA before RMD starts. Thank you for reinforcing that sentiment. How does after-tax RMD figure into this? Can that be combined and automagically deal with the basis calculation or am I destined to not have it so automatically happen? My after-tax IRA is relatively small (100K vs 2M+) compared to tIRA.

I would combine the 401(k)s and IRA into one IRA account.

Generally, you're required to take an RMD from each 401(k) individually. If you have multiple IRAs, the RMD is figured in aggregate and you can take it from the IRAs in any way you choose.

If you're getting close, your RMDs will start in the year you turn 73. Your wife's RMDs will start in the year she turns 73. There's a special "April 1" rule where you can defer the first RMD into the year you turn 74, but that's usually a bad idea.

To figure your RMDs, take the account balance at the end of the previous year (so 12/31 of the year in which you turn 72) and divide it by 26.5, which is the age 73 divisor from Table III in the appendices at the very back of IRS Pub 590-B.

You may want to increase the account balances by expected growth between now and then.

Vanguard has an RMD service where you can set it up with them to do your RMD for you automagically - they automate the calculation, distribution, and they'll withhold at whatever percentage you want for federal. I think other custodians can also do this.

 

[SecondCor521]

I have this plan to have everything combined into my Vanguard IRA before RMD starts. Thank you for reinforcing that sentiment. How does after-tax RMD figure into this? Can that be combined and automagically deal with the basis calculation or am I destined to not have it so automatically happen? My after-tax IRA is relatively small (100K vs 2M+) compared to tIRA.

Everything I wrote and you quoted is the same regardless of your IRA basis. If you have basis in your IRA, you will probably want to do the pro rata calculations on Form 8606, which will result in less tax liability. You can decide if you want to use this fact to reduce the percentage amount that Vanguard automatically withholds from your RMD. But Vanguard doesn't know (and no custodian would know) about your basis amount, and they won't take it into account.

But the pro rata calculations are only 17 lines on Part I of Form 8606, and fully 10 of those are fourth grade math calculations, so it shouldn't be too big of a complication to handle in your taxes.

 

[Sunset]

I have, up this point, ignored consideration of RMDs and the associated tax consequences. Well, time marches on and I will be subject to RMDs in calendar year 2027. Wife will be subject to RMDs also in calendar year 2027. I am sitting on about $1,580,000 in IRAs and 401ks, Wife has about $407,000 in IRAs, in current $.

.....

Since your combined RMD would be currently $75,981 , just add that into your tax return numbers and see what happens. Do you jump up higher in tax brackets ?

In your shoes, I'd think about doing some Roth Conversions if you can do it at a lower tax rate than what you will pay with an extra $75,981 income added.

Note; I don't bother to try to guess what the the numbers will be be in X years as there are a lot of factors in play including tax changes.

 

[target2019]

Here is another RMD calculator, from dinkytown.

https://www.dinkytown.net/java/required-minimum-distribution-rmd-future-projection.html

When it comes to RMD estimates, I think it's silly to say we can't know, especially when the something is studied, analyzed and addressed by legitimate sources.

As we've seen with Schwab, calculators can go uncorrected for rules changes. But you know that you'll have an RMD closer to what's estimated there, than a WAG.

What is true of each projected RMD is that the estimated number becomes more uncertain as time goes on. I know from my own estimates of portfolio growth that a straight line or monte carlo or something in-between is never 100% accurate. But estimating future income and expenses is worthwhile in my opinion.

As some point out, you can mitigate RMD's with QCD's and Roth conversions.

Having experience with preparing your own taxes is probably the #1 advantage, IMO, when dealing with RMD impact. As mentioned in another response, duplicate last year's taxes, and add a 1099 for the the next RMD. Sure, it's not going to be exact, but you have something that can guide you through other final decisions.

 

[Koolau]

The one exception, I believe, are QCDs, which are above the line deductions (i.e. - they reduce MAGI).

Right. Since I currently only have a 401(k) I don't qualify for QCDs but could open tIRAs with funds from my 401(k) anytime I want to.



Good point.

 

[Hermit]

Right. Since I currently only have a 401(k) I don't qualify for QCDs but could open tIRAs with funds from my 401(k) anytime I want to.

I rolled my 401k over to an IRA several years ago in anticipation of some large charitable commitments I had coming up. That also allowed me to separate a small amount of after tax money in my 401k and put it in a Roth IRA.

 

[Koolau]

I rolled my 401k over to an IRA several years ago in anticipation of some large charitable commitments I had coming up. That also allowed me to separate a small amount of after tax money in my 401k and put it in a Roth IRA.

I kept my 401(k) for several reasons but can open a tIRA with the money at any time. Best of both worlds in my case.

 

[oldtimer]

I kept my 401(k) for several reasons but can open a tIRA with the money at any time. Best of both worlds in my case.

You just have to remember to move the $ the calendar year prior to when you want to do the QCD. One needs an IRA balance on 12/31 prior year that is equal to or greater than your planned QCD.

 

[TheWizard]

You just have to remember to move the $ the calendar year prior to when you want to do the QCD. One needs an IRA balance on 12/31 prior year that is equal to or greater than your planned QCD.

I don't think that's right.
If your plan is to do QCDs in lieu of RMDs, then yes, you would want $100k in that tIRA by 12/31 to allow QCDs of around $4000 (or more).

But it's not necessary to link QCDs with RMDs.
Younger folks can do QCDs at age 71 even though RMDs don't start for them until age 73 or 75...

 

[Souschef]

Being an Excel addict, I have a spreadsheet that calculates my RMD every year. I have loaded the RMD table through age 100 into the spreadsheet, and all I have to do every year is input the 12/31 values of my IRA from the previous year.
I also have another spreadsheet to calculate my quarterly estimated payments.