Suggestions for estimating future RMDs

[Healthy Lifestyle]

I have recently used Dinkytown. Calculator for future Roth IRA estimates and found it to be very helpful.

 

[single2019]

Enter 2037 RMD date, 1962 birthday, $1,000,000, and 5% growth. The output is today's RMD of $1,000,000/24.6=$40,650. The calculator asks you to enter growth, then ignores it for future start dates. Not material if you are already in RMDs or just a few years out, but wrong for forecasting.

The correct answer is $1M x 1.05^13 / 24.6 = $76,652.

It apparently only applies rate of return after you start RMDs, which is not useful for future start dates. The tooltip says "... future year RMDs can be calculated by changing this value." but it doesn't work for future.

Keep the 2024 RMD date in the calculator. Enter your other data and it will show correct results. I just ran your numbers and get $76,652. It shows RMD of zero from 2024 to 2036. Shows the growth and the RMD

 

[USGrant1962]

Keep the 2024 RMD date in the calculator. Enter your other data and it will show correct results. I just ran your numbers and get $76,652. It shows RMD of zero from 2024 to 2036. Shows the growth and the RMD

Hmm. That works, but now I'm confused by the entry for "Year of RMD." What is that supposed to mean or what is it for?

 

[gauss]

I'll put my usual shout out for doing Qualified Charitable Distributions (QDD's). Starting at age 70.5 you can donate up to $100,000 directly from your IRA's to 501(c)(3) organizations. This will reduce the account balance on December 31st, then you calculate your RMD. QCD's can only be made from IRA's and not any other type of retirement account. The $100,00 is for each person. You can consult with the IRS Publication 590-B for the details.

And at the risk of stating the obvious, QCDs are not included in your AGI or your taxable income for the year. You are effectively getting a charitable tax deduction (but better), while at the same time taking the Standard Deduction.

-gauss

 

[Badger]

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

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.

Our IRA accounts are at Vanguard and this is what we have been doing for the past 6 years. Works well. I generally double check them and it comes out just right. Remember that the formula changes slightly each year so the amount of RMD usually changes.
Through the year I have dividends from the IRA MF swept into an IRA MM. then use that MM account for RMD. The number of shares in the MF doesn't change. This is just for me to organize my thoughts and not a recommendation.

 

[target2019]

Schwab will give you a 10-year projection in a table format here: https://www.schwab.com/ira/ira-calculators/rmd

 

[pb4uski]

Yes, very handy tool.

 

[Spock]

Schwab will give you a 10-year projection in a table format here: https://www.schwab.com/ira/ira-calculators/rmd

That tool doesn't seem to take into account the "new" RMD start ages... I don't have to start until 75 but the tool is still starting at 73.

 

[MissMolly]

That tool doesn't seem to take into account the "new" RMD start ages... I don't have to start until 75 but the tool is still starting at 73.

Yes it does. If you drop down the box to 10 year projection you get zeros up until your age 73 year. Or if you do the drop down for lifetime, the little green bars indicating distributions don't show until your age 73 year.

 

[Spock]

Yes it does. If you drop down the box to 10 year projection you get zeros up until your age 73 year. Or if you do the drop down for lifetime, the little green bars indicating distributions don't show until your age 73 year.

But I don't start until age 75 and even though the tool collected birthdate it has me starting at age 73.

 

[SecondCor521]

Yes it does. If you drop down the box to 10 year projection you get zeros up until your age 73 year. Or if you do the drop down for lifetime, the little green bars indicating distributions don't show until your age 73 year.

Some of us young folk can wait until age seventy-five. Most current near-term RMD folk are age seventy-three.

 

[USGrant1962]

Yes it does. If you drop down the box to 10 year projection you get zeros up until your age 73 year. Or if you do the drop down for lifetime, the little green bars indicating distributions don't show until your age 73 year.

Spock is correct - it shows me starting at age 73 when my RMD date in age 75 (born after 1959).

 

[Koolau]

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.

One "good" thing about the way IRMAA is structured is that it is indexed for inflation which may help you stay under the limits. IF you see that you will exceed the first IRMAA limit in a given year, you might consider taking EXTRA from your 401(k) and or tIRA but stay under the next IRMAA limit. You will deplete a bit of your qualified money, making the next year a bit easier to manage on an IRMAA basis. Of course, if your qualified money grows too fast you could STILL be in IRMAA territory the next year. Good First World problem, once again. YMMV

 

[Car-Guy]

One "good" thing about the way IRMAA is structured is that it is indexed for inflation which may help you stay under the limits. IF you see that you will exceed the first IRMAA limit in a given year, you might consider taking EXTRA from your 401(k) and or tIRA but stay under the next IRMAA limit. You will deplete a bit of your qualified money, making the next year a bit easier to manage on an IRMAA basis. Of course, if your qualified money grows too fast you could STILL be in IRMAA territory the next year. Good First World problem, once again. YMMV

Yep, once I went over the first tier (unplanned) late last year, I ran it up closer to tier two. Of course the downside there is that money is taxed at a higher rate. It's a tradeoff. In the end, "They" get you no matter what you do!

 

[CardsFan]

.... Of course, if your qualified money grows too fast you could STILL be in IRMAA territory the next year. Good First World problem, once again. YMMV

Yeah, that darn qualified money grows too fast. After 9 years of conversions, our Roth's (which started at 0) are about equal to 50% of the starting tIRA's, but the tIRA's are 50% greater than their starting value. What a great "problem" to have.

 

[braumeister]

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.

 

[gauss]

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.

+1

That's basically the strategy that I am working too. Been converting up to the top of the 24% since TCJA went into effect in 2018.

I also plan to leave some for future QCDs too.


-gauss

 

[TheWizard]

OP isn't doing Roth conversions.
Leaving tax-deferred money untouched until RMD time isn't the best solution for everyone.
But some folks seem to do it regardless...

 

[target2019]

This calculator is updated for Secure 2.0. https://investor.vcm.com/insights/investor-learning/calculators/required-minimum-distribution

Same calculator at Voya: https://www.voya.com/tool/rmd-calculator

There is a complete report. Locate the correct button on screen.

 

[TheWizard]

This calculator is updated for Secure 2.0. https://investor.vcm.com/insights/investor-learning/calculators/required-minimum-distribution

Same calculator at Voya: https://www.voya.com/tool/rmd-calculator

There is a complete report. Locate the correct button on screen.

Those calculators are close to a waste of time for folks who have a high percentage of equity funds in tax deferred. You simply cannot predict what your gains/losses over the next several years will be...

 

[CardsFan]

Those calculators are close to a waste of time for folks who have a high percentage of equity funds in tax deferred. You simply cannot predict what your gains/losses over the next several years will be...

And you have found a calculator that CAN predict those?

The referenced calculators, and those like them, at least allow you to get an appreciation of what COULD happen, by running several return rates.

They also don't take inflation into account. While RMD's are not inflation adjusted, the tax rate paid is adjusted.

These are tools to help you bracket what COULD happen.

 

[target2019]

Those calculators are close to a waste of time for folks who have a high percentage of equity funds in tax deferred. You simply cannot predict what your gains/losses over the next several years will be...

If someone is putting together a plan, or trying to understand a plan being offered, they have the right to ask a question and get an answer. It's part of the learning thing. YMMV.

 

[Gumby]

If someone is putting together a plan, or trying to understand a plan being offered, they have the right to ask a question and get an answer. It's part of the learning thing. YMMV.

And sometimes the answer "we just can't know right now" is a perfectly good answer. As long as people know the rules of taking RMD's and understand the IRS table, they can make their own predictions about future returns and tIRA balances and calculate accordingly. But it doesn't hurt to acknowledge that the future is only marginally predictable, so the results of those calculations are not holy writ, just an educated guess.

As for me personally, I have been making Roth conversions within the 22% bracket. Right now, I think that RMDs won't throw me into the 24% bracket or higher when they start in 8 years, but I have no way to be certain. When the time comes, I'll just do what the law requires and pay the taxes that are owed.

 

[pb4uski]

Those calculators are close to a waste of time for folks who have a high percentage of equity funds in tax deferred. You simply cannot predict what your gains/losses over the next several years will be...

I disagree. Hard to know how close or far off it will be but and educated guess is better that sitting there with your thumb up your ....

 

[tulak]

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.

This is my goal and I suspect I'll be happy I did it too.

Right now Roth is ~25% and 401k/IRA ~70%. End of 2020 it was Roth ~20% and 401k/IRA ~76%, so it's trending in the right direction.

I'm still working, so mine is done by contributions and having aggressive investments in the Roth and conservative investments in the 401k/IRA.

Once I stop working, the goal is to drain/convert as much as possible from the 401k/IRA. Time will tell on how well that works out.