U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Retirement
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 07-26-2014, 08:10 PM
 
Location: High Cotton
6,131 posts, read 6,450,717 times
Reputation: 3657

Advertisements

Quote:
Originally Posted by reed303 View Post
"Required" RMDs don't start until 70.5. You can start UNreguired withdrawals from 59.5 to 70.5, which I have done for last 9 years, to reduce the amount of RMDs at 70.5
Quote:
Originally Posted by TuborgP View Post
Bada Bing! Spoken like a man who has the money and knows the deal of what they need to do.
Not so fast TuborgP! What Reed said could be taken wrong, which would cause some headaches later down the road at age 70.5.

~~~~~~~~~~~~~

Reed - I'm afraid you were not very detailed in what you said (bolded in red above in your quote). Just to be clear, so people interested in this topic (and in what you said) will know the facts: You have been 'effectively' reducing the amount of RMDs that will start at age 70.5 only because there will be less money in your dedicated account(s) from having taken withdrawals (distributions), NOT because the withdrawals you have taken prior to turning age 70.5 are calculated to count toward reducing the RMD amount.

Calculation of the RMD amount is based on your account balance as of December 31 of the previous year. For instance, if you are calculating your RMD for 2015, you want to use the market value as of December 31, 2014. Assuming your RMD for the year is say $10,000, your RMD will be satisfied as long as you withdraw $10,000 by the deadline. That said, if you withdraw $12,000 during the year, the extra $2,000 you withdraw cannot be used toward the next year's RMD, as only amounts withdrawn during the year can be counted toward your RMD for the year. Likewise, withdrawals prior to turning age 70.5 do not count toward any RMD calculation. Simply put, distributions prior to age 70.5 do not count toward the RMD for that year, nor do distributions in excess of the RMD in a particular year count toward a subsequent year.
Reply With Quote Quick reply to this message

 
Old 07-26-2014, 09:40 PM
 
Location: OH>IL>CO>CT
5,252 posts, read 8,434,403 times
Reputation: 7225
Quote:
Originally Posted by highcotton View Post
Not so fast TuborgP! What Reed said could be taken wrong, which would cause some headaches later down the road at age 70.5.

~~~~~~~~~~~~~

Reed - I'm afraid you were not very detailed in what you said (bolded in red above in your quote). Just to be clear, so people interested in this topic (and in what you said) will know the facts: You have been 'effectively' reducing the amount of RMDs that will start at age 70.5 only because there will be less money in your dedicated account(s) from having taken withdrawals (distributions), NOT because the withdrawals you have taken prior to turning age 70.5 are calculated to count toward reducing the RMD amount.

Calculation of the RMD amount is based on your account balance as of December 31 of the previous year. For instance, if you are calculating your RMD for 2015, you want to use the market value as of December 31, 2014. Assuming your RMD for the year is say $10,000, your RMD will be satisfied as long as you withdraw $10,000 by the deadline. That said, if you withdraw $12,000 during the year, the extra $2,000 you withdraw cannot be used toward the next year's RMD, as only amounts withdrawn during the year can be counted toward your RMD for the year. Likewise, withdrawals prior to turning age 70.5 do not count toward any RMD calculation. Simply put, distributions prior to age 70.5 do not count toward the RMD for that year, nor do distributions in excess of the RMD in a particular year count toward a subsequent year.
The bold was what I intended to accomplish.

Can you provide a link to an IRS Pub that explains what you are saying about the effect on the first post-70.5 RMD ?
Reply With Quote Quick reply to this message
 
Old 07-27-2014, 03:20 AM
 
71,869 posts, read 71,942,576 times
Reputation: 49418
high cotton is correct but i think everyone understands it reduces your balance later on.

what i think high cotton is saying is you have to becareful when you hit 70.5.

any EXTRA money you take out has to be in excess of that years withdrawal . so if i still wanted to do roth conversions at 70.5 i have to take out my full rmd first which cannot be put in a roth ,then anything in that year i take out extra can be converted. but that extra i took out will not count towards the following year.

i don't think many fail to understand that.

reducing the balance reduces the rmd's is fairly well understood..
Reply With Quote Quick reply to this message
 
Old 07-27-2014, 07:36 AM
 
2,429 posts, read 3,230,179 times
Reputation: 3330
Maybe I don't understand all that I should about this.

My mom's financial planner (and the investment house, I guess) send us paperwork saying what the RMD is. She takes it and just puts in her MMF. Whether you need the money -- or don't need the money -- I don't get why it has to be that complicated. If you don't want to be short on the amount round up to the nearest hundred or thousand, and put it in another account. I suppose if you want to put it in another 'retirement' account that's more 'detailed' of an issue. I like to keep my finances simple, I guess.
Reply With Quote Quick reply to this message
 
Old 07-27-2014, 07:50 AM
 
71,869 posts, read 71,942,576 times
Reputation: 49418
it isn't complicated at all. but people screw it up when they do roth conversions because in any given year you have to calculate or better yet take the required distribution , then you can convert as much as you want afterward that. folks get it backwards ,they do a roth conversion and then calculate that years rmd less the conversion amount which is a no no and gets a 50% penalty..
Reply With Quote Quick reply to this message
 
Old 07-27-2014, 11:53 AM
 
Location: High Cotton
6,131 posts, read 6,450,717 times
Reputation: 3657
Quote:
Originally Posted by rdflk View Post
Maybe I don't understand all that I should about this.

My mom's financial planner (and the investment house, I guess) send us paperwork saying what the RMD is. She takes it and just puts in her MMF. Whether you need the money -- or don't need the money -- I don't get why it has to be that complicated. If you don't want to be short on the amount round up to the nearest hundred or thousand, and put it in another account. I suppose if you want to put it in another 'retirement' account that's more 'detailed' of an issue. I like to keep my finances simple, I guess.
The purpose of the RMD (Required Minimum Distribution) is really very simple - it is all about taxation!

The purpose of the RMD is to prevent indefinite postponement of taxation on the funds held in retirement accounts. Some people would not take any distributions from their dedicated 'tax-deferred' retirement accounts and our government would therefore not be able to derive any revenue - because the gain on these tax-deferred retirement accounts would thus be tax-free forever if the government did not force people with dedicated retirement accounts to withdraw a mandatory [minimum] amount every year beginning when they reach age 70.5. That is why the government has imposed a compulsory required minimum distribution rules to force taxpayers to take some mandatory distributions...or else be hit with a stiff 50% penalty on the amount that you failed to withdraw.

Simply put - the government wants to tax the money in these retirement accounts. If, like Reed, you withdraw some money from your retirement account(s) before reaching age 70.5 then the government gets to tax the distributions (money amounts) from your retirement savings sooner, rather than than beginning at age 70.5. It is not advantageous tax-wise to make withdrawals from retirement account(s) before age 70.5 (as one may have incorrectly assimilated from Reed saying: "You can start UNreguired withdrawals from 59.5 to 70.5, which I have done for last 9 years, to reduce the amount of RMDs at 70.5".).
Reply With Quote Quick reply to this message
 
Old 07-27-2014, 12:10 PM
 
Location: High Cotton
6,131 posts, read 6,450,717 times
Reputation: 3657
Quote:
Originally Posted by reed303 View Post
"Required" RMDs don't start until 70.5. You can start UNreguired withdrawals from 59.5 to 70.5, which I have done for last 9 years, to reduce the amount of RMDs at 70.5
Quote:
Originally Posted by highcotton View Post
Reed - I'm afraid you were not very detailed in what you said (bolded in red above in your quote). Just to be clear, so people interested in this topic (and in what you said) will know the facts: You have been 'effectively' reducing the amount of RMDs that will start at age 70.5 only because there will be less money in your dedicated account(s) from having taken withdrawals (distributions), NOT because the withdrawals you have taken prior to turning age 70.5 are calculated to count toward reducing the RMD amount.
Quote:
Originally Posted by reed303 View Post
The bold was what I intended to accomplish.
Reed - I just wanted to make sure people knew that your 9 year habit of "UNrequired withdrawals from 59.5 to 70.5" had no tax reducing strategy or advantages, which some people may have thought was implied by your statement.
Reply With Quote Quick reply to this message
 
Old 07-27-2014, 01:10 PM
 
5,400 posts, read 6,550,585 times
Reputation: 10477
but doesn't doing Reed's strategy preclude you from bumping up into a higher tax bracket because the RMDs at 70.5 would be less because the amount to be withdrawn from is less?

once you start layering pension + social security + other income you are pushing up pretty close to higher tax brackets.
Reply With Quote Quick reply to this message
 
Old 07-27-2014, 01:15 PM
 
18,877 posts, read 13,654,263 times
Reputation: 14341
Quote:
Originally Posted by highcotton View Post
Reed - I just wanted to make sure people knew that your 9 year habit of "UNrequired withdrawals from 59.5 to 70.5" had no tax reducing strategy or advantages, which some people may have thought was implied by your statement.


There is a tax strategy behind it with potential tax savings. If I withdrawl 200-300k from my Ira under normal distributions between 59.5 and 70 I would reduce my rmd amount and possibly my income tax for those years. I would guess the smaller the Ira the better ie if you were able to remove everything with limited tax implications during that time and had zero rmd's to deal with. Could make as much as 12k in income difference if you dropped your Ira from 1mm to 700m before 70.5
Reply With Quote Quick reply to this message
 
Old 07-27-2014, 01:26 PM
 
Location: OH>IL>CO>CT
5,252 posts, read 8,434,403 times
Reputation: 7225
Quote:
Originally Posted by theoldnorthstate View Post
but doesn't doing Reed's strategy preclude you from bumping up into a higher tax bracket because the RMDs at 70.5 would be less because the amount to be withdrawn from is less?

once you start layering pension + social security + other income you are pushing up pretty close to higher tax brackets.
Exactly my intent.

It may not work for everybody, especially those with quite a bit of money in their IRAs. (ie in the millions), and can't get out of the 25%+ tax brackets. I have been doing "what-if" 1040s for my post-age 70s, and my strategy appears to keep me just inside the 15% bracket, even including a small pension, SS & RMDs. And some years prior were in the 10% bracket, being pre-pension & pre-SS years (starting now at age 70)

As always, YMMV.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Retirement
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2019, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top