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I’m almost at RMD time. I have a substantial pension, SS for the wife and I that covers most of our day to day needs. I could take the RMD in January/February and dump it into the money market account currently earning 3.5%, leave it in the stock market and take it monthly, or leave it in the market and take it November/December.
We will be in a fairly high tax bracket so a Roth conversion might not work. Thoughts?
I am considering moving my more equity oriented deferred account from RMD in December to RMD in January. It seems to me that RMD quickly after the 31st of December would more accurately reflect the balance upon which the RMD is based. So far, I have had them all dump in December when it is easiest to judge whether I need to change my last quarterly estimated tax amount. Or so I convinced myself.
If you expect your investments to grow don't take it until Dec.
Remember you have to make estimated income tax payments each quarter so taking it all now will cause you to pay the total tax on it now.
My RMD will be established basis the balance on December 31 of the prior year. Are the taxes due basis the day I take the funds or on a quarterly basis regardless of when I take the funds?
My RMD will be established basis the balance on December 31 of the prior year. Are the taxes due basis the day I take the funds or on a quarterly basis regardless of when I take the funds?
If the funds come from IRA or rollover IRA the fund company will take 10% of the proceeds as withholding. Taxes are not due until you file your tax return. So if you are doing estimated tax based on last year's return the RMD does not have to add to the problem.
If the fund has monthly/quarterly dividend distributions this may not take place. In this case maybe distribution covers RMD. You can set up withholding.
Many of the calculators have you take out RMD in January then have the account grow at some rate of return until the next year. Then you have a new amount. There may be a chart showing at age 73-85 the account continues to grow. Then from 85-on the account begins to deplete.
What these calculators leave out is where you deposit the RMD. In the new taxable account maybe the amount grows. A lot of the calculators assume you spend the money & pay sales tax. IMHO becomes a wash when you do RMD.
When I take my RMD, I have the Financial Institution withhold whatever % I wish. It's not a fixed %. It could be Zero%.
It's up to me to make sure I pay the correct amount at the correct time. One is supposed to make quarterly Estimated Tax payments as one receives income. The tax is due in whichever quarter you receive the RMD.
If the market dips significantly I am encouraged to take my RMD, thereby moving a larger number of shares from the IRA to my taxable account.
When I take my RMD, I have the Financial Institution withhold whatever % I wish. It's not a fixed %. It could be Zero%.
It's up to me to make sure I pay the correct amount at the correct time. One is supposed to make quarterly Estimated Tax payments as one receives income. The tax is due in whichever quarter you receive the RMD.
Yes, you can specify whatever % tax that you wish. We always put 0%.
It's up to the taxpayer to pay the correct amount at the correct time. If you don't have have your taxes withheld automatically, you can make quarterly estimated tax payments. However, the tax portion for the RMD does not have to be made exactly in the quarter that you receive it.
The estimated tax payment for each quarter has to be enough to cover the income you receive in the quarter REGARDLESS of the income source. If not, you will have to pay a small penalty.
For us, since we receive a large portion of our income (from year-end dividend/capital gains payments and RMD) at the end of the year, we pay a much larger estimated tax in January the next year than the previous 3 payments in the year.
We use Turbo Tax of the previous year and put in the income we had received or expected to receive for the current year to determine how much estimated tax that we should pay in each quarter.
If should be noted that we also use TT to help with determining how much Roth IRA conversion that we should make so that our expected adjusted gross income for the year stay just below the next Medicare IRRMA bracket.
My RMD will be established basis the balance on December 31 of the prior year. Are the taxes due basis the day I take the funds or on a quarterly basis regardless of when I take the funds?
That depends on whether you file estimated taxes or, as we do, use RMDs to pay all taxes as withholding.
Someone else mentioned the estimated tax payment rules. The IRS deems all withheld taxes to be timely. So, we make QCDs throughout the year, but take distributions in Nov and Dec and have taxes withheld at that time. You'll need to estimate your taxable income, the complexity of which depends on your income sources but being 10-11 months into the year you can get close.. In the last five years, we've been a couple of thousand each way each year.
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