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Old 04-21-2016, 12:53 PM
 
Location: Henderson, NV
3,455 posts, read 2,254,936 times
Reputation: 36547

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I'm of an age where I've started taking the required minimum distribution (RMD) from my tax-sheltered funds. Almost all of my funds are in IRAs and are actively managed by an advisor who withdraws their quarterly fees from these funds. While I agreed to this arrangement when I first became their client, I've recently had some questions about it. My questions are:


- Since the advisor is receiving these funds directly from my IRA, do I count these disbursements toward my RMD?


- If the answer to the above question is yes, should I be counting these distributions as income and paying taxes on them?


I asked the advisor and she said no to both, but that doesn't seem logical.


Thanks for your responses.
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Old 04-21-2016, 01:11 PM
 
Location: RVA
2,165 posts, read 1,265,978 times
Reputation: 4456
Yes, it would be no to both. Hope you really trust her. Her fees are reductions to your taxed earnings, so have nothing to do with the RMD amount, except it lowers the actual RMD, which is based on the value at the last day on the year. It can't count as an RMD to you because the while point of the RMD is for YOU to pay taxes, on the amount YOU deferred and have made earnings on. Her fees are not distributions, which by definition, is income to you.

If you were to pay her out of pocket, from your annual RMD amounts, then your total value in your deferred accounts would be higher, which means a higher RMD, higher taxes on that higher income, you then subtract the amiunt you can actually spend by paying her.

I hope her accounting is solid and you realize the true cost of her fees in a managed account.
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Old 04-21-2016, 02:19 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,927,825 times
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My gut reaction would have been the same as the original poster's - but Perryinva is correct.

OTOH - you have the option of paying the IRA fees with outside funds. Pays for the OP to do a little figuring to determine which makes the most sense for her:

How to Pay IRA Expenses

Robyn
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Old 04-21-2016, 05:21 PM
 
Location: Henderson, NV
3,455 posts, read 2,254,936 times
Reputation: 36547
Thanks Perryinva and Robyn for your very helpful responses.
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Old 04-22-2016, 03:10 PM
 
Location: Florida
4,362 posts, read 3,698,498 times
Reputation: 4095
If your RMD is more than you need I would pay the advisor from funds outside of the IRA. This will leave more money in the IRA to grow.
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