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Old 07-21-2014, 11:04 AM
 
Location: SC
8,791 posts, read 5,649,808 times
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By the time I hit 70, I should have about 1.5M in my IRA account.

At that time I will be forced to take the yearly RMD of 3-4%

This is money I won't need, and I would prefer not to pay the tax hit, leaving it where it is so that it can continue to generate money would be best; but it seems at this point withdrawal will not be avoidable.

So, where do you move your RMD when you don't need it?
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Old 07-21-2014, 11:44 AM
 
Location: New Jersey
12,764 posts, read 7,819,307 times
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Maybe to your favorite charity!
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Old 07-21-2014, 12:20 PM
 
Location: The South
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I put my RMD in my brokerage account and mostly buy tax free munis
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Old 07-21-2014, 12:27 PM
 
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I might talk to my CPA about buying an annuity through my IRA account to see how that would affect RMD and income tax.
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Old 07-21-2014, 12:30 PM
 
18,848 posts, read 13,592,109 times
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Quote:
Originally Posted by LookingatFL View Post
I might talk to my CPA about buying an annuity through my IRA account to see how that would affect RMD and income tax.
The only way to lessen your rmd is to reduce the value of it before you hit 59 1/2
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Old 07-21-2014, 12:37 PM
 
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There is a recent new law which says that an annuity purchased in the IRA is not included in RMD calculations. See the following article:

Required Minimum Distribution (RMD) — ImmediateAnnuities.com


"The most common treatment of an "annuitized" IRA with respect to RMDs is that the premium dollars which were used to purchase the annuity are not included in any future RMD calculations. The IRS considers an IRA immediate annuity to have satisfied future RMDs (that is, only with respect to the amount of premium which was used to buy the IRA Annuity).

There are two reasons for this:

First, an annuitized IRA does not have a cash value to enter in an RMD calculation. When you buy an immediate annuity you relinquish control of the premium to the insurance company in return for an unsecured promise that the company will make certain future payments to you. You no longer own an account with an underlying cash balance. In general, you cannot even withdraw a lump sum payment from your immediate annuity. (Recently, some companies have begun to offer cash advances in their immediate annuity contracts but that has not effected the principle mentioned here.)

A second reason why the IRS has determined that an annuitized IRA should be excluded from RMD calculations is because of the level-nature of immediate annuity payments. An immediate annuity income stream is usually a non-increasing payment stream. The same monthly amount paid to you at age 70 is paid to you when you reach 80 and beyond. The payments, once established, do NOT change as you get older. RMD distributions, on the other hand, ARE required to increase as a proportion of the total value of your IRA holdings as you age. So there is a unique challenge in fitting level immediate annuity payments into the increasing RMD model."
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Old 07-21-2014, 12:59 PM
 
Location: OH>IL>CO>CT
5,230 posts, read 8,388,588 times
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Quote:
Originally Posted by Lowexpectations View Post
The only way to lessen your rmd is to reduce the value of it before you hit 59 1/2
"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
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Old 07-21-2014, 01:25 PM
 
Location: UpstateNY
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Reed, what did you do with the withdrawal money?

Also, isn't it eight percent? or four?
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Old 07-21-2014, 01:26 PM
 
Location: Florida -
8,760 posts, read 10,832,098 times
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Quote:
Originally Posted by LookingatFL View Post
There is a recent new law which says that an annuity purchased in the IRA is not included in RMD calculations. See the following article:

Required Minimum Distribution (RMD) — ImmediateAnnuities.com


"The most common treatment of an "annuitized" IRA with respect to RMDs is that the premium dollars which were used to purchase the annuity are not included in any future RMD calculations. The IRS considers an IRA immediate annuity to have satisfied future RMDs (that is, only with respect to the amount of premium which was used to buy the IRA Annuity).

There are two reasons for this:

First, an annuitized IRA does not have a cash value to enter in an RMD calculation. When you buy an immediate annuity you relinquish control of the premium to the insurance company in return for an unsecured promise that the company will make certain future payments to you. You no longer own an account with an underlying cash balance. In general, you cannot even withdraw a lump sum payment from your immediate annuity. (Recently, some companies have begun to offer cash advances in their immediate annuity contracts but that has not effected the principle mentioned here.)

A second reason why the IRS has determined that an annuitized IRA should be excluded from RMD calculations is because of the level-nature of immediate annuity payments. An immediate annuity income stream is usually a non-increasing payment stream. The same monthly amount paid to you at age 70 is paid to you when you reach 80 and beyond. The payments, once established, do NOT change as you get older. RMD distributions, on the other hand, ARE required to increase as a proportion of the total value of your IRA holdings as you age. So there is a unique challenge in fitting level immediate annuity payments into the increasing RMD model."

Can dollars taken out of an IRA-based Annuity then be used to satisfy RMD's in other accounts?
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Old 07-21-2014, 01:29 PM
 
Location: North Idaho
2,172 posts, read 2,080,786 times
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Depending on your tax situation, you might talk to a good tax adviser about converting some of your traditional IRA to a Roth IRA prior to when your RMDs start. Obviously, you pay taxes on the conversion, but if you can do that while staying in a low tax bracket that might make sense. Once in a Roth there are no RMDs and you never pay taxes on that money again.

Dave
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