View Full Version : When taking money out of an IRA account
iris lilies
4-7-23, 10:51am
What happens when you take money out of your IRA account?
i want to take money out of my Vanguard IRA account. Will Vanguard issue some sort of document for tax purposes?
I know this is a silly simple question, but I’ve never removed money from an IRA before, I’ve just shoved money into it.
Yes, Vanguard will provide a 1099-R, although you may have to log into your account to download it, depending upon whether or not you've opted to go paperless.
iris lilies
4-7-23, 11:03am
Yes, Vanguard will provide a 1099-R, although you may have to log into your account to download it, depending upon whether or not you've opted to go paperless.
Thank you!
Thank you!
Alan is exactly right. You will be asked when you withdraw whether you want to withhold federal and state taxes. If you say yes, then you will receive an amount after those are deducted.
I have always gotten a 1099R in the mail from Schwab.
iris lilies
4-7-23, 11:32am
Alan is exactly right. You will be asked when you withdraw whether you want to withhold federal and state taxes. If you say yes, then you will receive an amount after those are deducted.
I have always gotten a 1099R in the mail from Schwab.
How do they know my tax rate? Or is it a flat rate for evetyone?
How do they know my tax rate? Or is it a flat rate for evetyone?
With Vanguard they ask you to decide what percentage (if any) of your distribution you wish to be withheld. I always choose 15% which seems to be more than adequate for my tax needs.
So what if it's a Roth IRA? You've paid into it with money already taxed.
How do they know my tax rate? Or is it a flat rate for evetyone?
It is not a flat rate, you can choose. So I usually select 15% to fed, sometimes 10% depending on how the year is going, and 5% to my state--that is the minimum I can choose for my state.
You do not have to withhold any taxes, though.
You do not have to withhold any taxes, though.
I've not withheld taxes for 30+ years now, preferring to have my money up-front and just pay estimated tax quarterly.
So what if it's a Roth IRA? You've paid into it with money already taxed.
My understanding is that the person who opened and paid into the Roth is not subject to rmd’s. However, when that person dies the person who inherits it will have to take rmd’s and that the value of it at the time of death of the original holder is the cost basis for it going forward, just like most other investments.
My understanding is that the person who opened and paid into the Roth is not subject to rmd’s. However, when that person dies the person who inherits it will have to take rmd’s and that the value of it at the time of death of the original holder is the cost basis for it going forward, just like most other investments.
Also my take, and rmd's of the inherited IRA must start regardless of the beneficiaries age.
I am not interested in RMDs. I want to take the whole thing out when I turn 59 1/2.
flowerseverywhere
4-8-23, 6:47am
If you take a lot of money out, is there a penalty for underpayment of quarterly taxes if you don’t have them take enough federal out?
I am not interested in RMDs. I want to take the whole thing out when I turn 59 1/2.
According to Schwab, if you are over 59 1/2 and have had it for more than 5 years, there are no penalties, no taxes, and no RMD's:
Roth IRA Withdrawal Rules | Withdrawal From Roth IRA | Charles Schwab (https://www.schwab.com/ira/roth-ira/withdrawal-rules)
According to Schwab, if you are over 59 1/2 and have had it for more than 5 years, there are no penalties, no taxes, and no RMD's:
Roth IRA Withdrawal Rules | Withdrawal From Roth IRA | Charles Schwab (https://www.schwab.com/ira/roth-ira/withdrawal-rules)
Excellent.TY.
But I don't understand why you want to take it all out since it can continue to grow tax free in there. On the other hand, I have a very tiny Roth that I will probably take out to close it out and pay for something when I am actually retired, so I get the logic.
But I don't understand why you want to take it all out since it can continue to grow tax free in there. On the other hand, I have a very tiny Roth that I will probably take out to close it out and pay for something when I am actually retired, so I get the logic.
I rolled over quit a bit of my regular IRA into a Roth when it made good tax sense. Roths are a great place to hold money since it can grow tax free.
But I don't understand why you want to take it all out since it can continue to grow tax free in there. On the other hand, I have a very tiny Roth that I will probably take out to close it out and pay for something when I am actually retired, so I get the logic.
Because I can use it towards a house in a freer state, then take my time moving. It would be difficult for DS to move abruptly and also in this market it's hard to buy with an offer contingent on sale of your house vs cash buyer.
It's definitely easier to move when you have already a place to go, then sell the house. I get it.
iris lilies
4-8-23, 12:04pm
Oh my God I’m so stupid, my Vanguard account is not an “IRA. “It is a 401(k) equivalent, a retirement account. I*DO*have a Roth IRA in another place.
Are the rules of dispersement the same for these “retirement “accounts?
Are the rules of dispersement the same for these “retirement “accounts?
Yes, if we're talking about IRA's and 401K's, although I'm not sure what a "401K equivalent retirement account" might actually be.
iris lilies
4-8-23, 12:20pm
Also, let me thank everyone who has responded to this, especially Tybee. And now Alan.
DH knows all this stuff but he is belligerent and uncommunicative about it because he does not want me to take out any of my money from my accounts. Remember that in my household we don’t spend money, we save the money. Always. The money always is saved. Or hoarded, depending on one’s point of view.
iris lilies
4-8-23, 12:21pm
Yes, if we're talking about IRA's and 401K's, although I'm not sure what a "401K equivalent retirement account" might actually be.
Is the government employee version which is 453B, at least I think that’s the number.
Contact the holder of your account and ask what the tax ramifications would be for the account you want to liquidate. Don't rely on us, albeit the information provided has been good.
Contact the holder of your account and ask what the tax ramifications would be for the account you want to liquidate. Don't rely on us, albeit the information provided has been good.
Frugal has the right idea.
Could it be a 403(B)?
403(b) Withdrawal Rules: Different Withdrawals, RMD's and Loans (investingfuse.com) (https://investingfuse.com/retirement/403b-withdrawal-rules/)
iris lilies
4-8-23, 5:44pm
Frugal has the right idea.
Could it be a 403(B)?
403(b) Withdrawal Rules: Different Withdrawals, RMD's and Loans (investingfuse.com) (https://investingfuse.com/retirement/403b-withdrawal-rules/)
That’s probably it.
iris lilies
4-10-23, 10:59am
Well, I’m switching yet again. This time I’m switching to a Roth IRA account. Our broker at that house issued to us checks many months ago for just this purpose, a checkbook for each of us tied to each one of our Roth accounts. Now it all makes sense because I thought he didn’t realize we are not old enough to remove money without tax consequences.
Of course, with a Roth, there are no tax consequences.
But you are old enough-- 59 1/2 is the cutoff. Why would you say you are not old enough to remove money without tax consequences? There are always going to be tax consequences when removing money from a regular IRA, even after 70 1/2. Now I am confused.
iris lilies
4-10-23, 11:48am
But you are old enough-- 59 1/2 is the cutoff. Why would you say you are not old enough to remove money without tax consequences? There are always going to be tax consequences when removing money from a regular IRA, even after 70 1/2. Now I am confused.
When I’m 70.5 years old I can move money from a regular IRA to a qualified charity, and neither party has to pay any tax. The federal government will get nothing. Zero. It will get what it deserves, zero.
The money I’m taking out today is going to a qualified charity, coming from a Roth IRA.
When I’m 70.5 years old I can move money from a regular IRA to a qualified charity, and neither party has to pay any tax. The federal government will get nothing. Zero. It will get what it deserves, zero.
The money I’m taking out today is going to a qualified charity, coming from a Roth IRA.
Thank you for the clarification and amplication!
frugal-one
4-10-23, 3:25pm
When I’m 70.5 years old I can move money from a regular IRA to a qualified charity, and neither party has to pay any tax. The federal government will get nothing. Zero. It will get what it deserves, zero.
The money I’m taking out today is going to a qualified charity, coming from a Roth IRA.
Why from the ROTH? That money is already tax free? Guess I am confused as to why you are doing this too???
Had taxes done today and learned that it is never too late to convert traditional IRA to ROTH......
iris lilies
4-10-23, 4:19pm
Why from the ROTH? That money is already tax free? Guess I am confused as to why you are doing this too???
Had taxes done today and learned that it is never too late to convert traditional IRA to ROTH......
I am not old enough to transfer money from a regular IRA to a qualified charity with no tax consequence.
Every other option I have to move $10,000 from retirement accounts to this charity comes with tax consequences.
The Roth option seems the best to me. I’m not sure what you mean by” doing this too.” In addition to what, I do not know.
To make this as simple as I possibly can: I am moving $10,000 from my Roth IRA to a qualified charity. This action incurs no tax to either party.
Our tax bill is already stupidly high this year due to a forced sale of stock.
rosarugosa
4-11-23, 6:02am
It's my understanding that you could take $10,000 of of a Roth to spend at the mall without tax repercussions.
I believe Frugal-one means that she too, is confused.
iris lilies
4-11-23, 9:34am
It's my understanding that you could take $10,000 of of a Roth to spend at the mall without tax repercussions.
I believe Frugal-one means that she too, is confused.
Yes, that is true, Roth money can be withdrawn for hookers and blow, no taxes need to be paid.
Yes, that is true, Roth money can be withdrawn for hookers and blow, no taxes need to be paid.
I think I would wait until 70.5 if it were my choice, and take from the regular IRA. The money in the Roth is more valuable. Or I would establish a charitable fund with some of my IRA and pay charities from there, getting the tax deduction.
This is due to fact that I have seen how expensive my mom's assisted living has been, and I realized yesterday that she has now been in assisted living for 5.5 years now. She pays 11900 a month.
iris lilies
4-11-23, 10:15am
I think I would wait until 70.5 if it were my choice, and take from the regular IRA. The money in the Roth is more valuable. Or I would establish a charitable fund with some of my IRA and pay charities from there, getting the tax deduction.
This is due to fact that I have seen how expensive my mom's assisted living has been, and I realized yesterday that she has now been in assisted living for 5.5 years now. She pays 11900 a month.
Wow, has it been that long? Doesn’t seem like it’s been five years that your mother has been there.
I suppose your thought is fine from a purely financial point of view. However – in this case the presiding decision is not purely financial, it is as usual in my household, marital conflict.
DH does not want to give this much money away right now. And, this organizations needs the money NOW, I am on the board. DH and I have a lot of money in joint checking accounts but I can’t use that because that’s partly his money.
So, I am limited to the “my money “accounts, which are a Roth IRA and the 403B. I guess I don’t have a regular IRA, I’ve just reviewed the list and nope, no regular IRA. You all are probably thinking “ How can Iris be so dumb about her accounts?” but honestly, I haven’t been in a situation to take money out of them, so I don’t pay any attention to the rules of withdrawal and which kind of accounts I have.
I would rather use the 403B account because it’s much bigger but… taxes ensue. Sure, I could just swallow and pay the taxes but I don’t want to. I just do not want the federal government to get more damn money.
Wow, has it been that long? Doesn’t seem like it’s been five years that your mother has been there.
I suppose your thought is fine from a purely financial point of view. However – in this case the presiding decision is not purely financial, it is as usual in my household, marital conflict.
DH does not want to give this much money away right now. And, this organizations needs the money NOW, I am on the board. DH and I have a lot of money in joint checking accounts but I can’t use that because that’s partly his money.
So, I am limited to the “my money “accounts, which are a Roth IRA and the 403B. I guess I don’t have a regular IRA, I’ve just reviewed the list and nope, no regular IRA. You all are probably thinking “ How can Iris be so dumb about her accounts?” but honestly, I haven’t been in a situation to take money out of them, so I don’t pay any attention to the rules of withdrawal and which kind of accounts I have.
I would rather use the 403B account because it’s much bigger but… taxes ensue. Sure, I could just swallow and pay the taxes but I don’t want to. I just do not want the federal government to get more damn money.
Probably more unwanted advice, but I would roll that 403B into a regular IRA somewhere like Schwab or Fidelity for ease of planning, handling, etc. I did that with my 401k, well part of it, when I turned 59 1/2, and continue to do so as I add to it from work, just roll some over every couple of years, but I am a control freak with my money, and want to have it under my control.
iris lilies
4-11-23, 12:29pm
Probably more unwanted advice, but I would roll that 403B into a regular IRA somewhere like Schwab or Fidelity for ease of planning, handling, etc. I did that with my 401k, well part of it, when I turned 59 1/2, and continue to do so as I add to it from work, just roll some over every couple of years, but I am a control freak with my money, and want to have it under my control.
Interesting. Why isn’t it under my control now?
Interesting. Why isn’t it under my control now?
My 401k was subject to my employer's rules.
I believe Enron employees lost their 401ks?
I don't want my employer to have control of my money.
I'd rather deal with Schwab than deal with the brokerage that controls my 401k.
I have more investing choices in an IRA.
Oh my God I’m so stupid, my Vanguard account is not an “IRA. “It is a 401(k) equivalent, a retirement account. I*DO*have a Roth IRA in another place.
Are the rules of dispersement the same for these “retirement “accounts?
Both IRAs and 401(k)s are considered qualified plans. Basically the same rules for distributions.
iris lilies
4-11-23, 3:50pm
My 401k was subject to my employer's rules.
I believe Enron employees lost their 401ks?
I don't want my employer to have control of my money.
I'd rather deal with Schwab than deal with the brokerage that controls my 401k.
I have more investing choices in an IRA.
my 403B was rolled over into Vanguard. I assume it’s still a 403B But if it’s not under the control of my employer, maybe it is now a regular IRA. I’m sorry to be so stupid but I just don’t remember. I rolled it over in 2015 and forgot about it.. My employer has nothing to do with it once I left employment. And now you will judge me because I’m going to tell you a secret: all this money is in a CD. Yes, a regular old boring CD, but hey, that’s the way I can sleep at night.
When DH and I retired in 2015 he and I had two separate accounts of about the same amount of money. Seven years later he has $200,000 more than I have because he didn’t put his in a boring CD. But I don’t care, I like knowing mine is not subject to the fluctuations of the market .
I think it's smart of you to invest in what lets you sleep at night.
Interesting. Why isn’t it under my control now?
My 401k was subject to my employer's rules.
I believe Enron employees lost their 401ks?
I don't want my employer to have control of my money.
I'd rather deal with Schwab than deal with the brokerage that controls my 401k.
I have more investing choices in an IRA.
With the exception of my 401k at my previous mega Corp employer I’ve rolled all the others into a single rollover IRA at E*Trade. It’s easier to manage, I can invest in a much wider range of investments with lower expenses than the limited choices at the various former employers. The only reason I have left money in mega corp’s 401k is because the expense charges are super low, presumably because it’s a company with 40,000 US employees. At some point I will also roll that into E*trade before I retire. The goal being to have my finances are simple as possible once I’m in drawdown mode.
A random aside that probably doesn’t affect anyone in this conversation. I worked at a company many years ago that got acquired by a different company. When that happened the 401k got shut down. The only option I had was to roll it into a crappy annuity that the 401k plan offered. I assume former employees had better options but I don’t know for sure. I only had a few thousand in it at the time so at least I didn’t get screwed as bad as the coworker that had taken out a 401k loan for a house down payment. He ended up having no choice but to deal with it as an early withdrawal, including the 10% penalty
frugal-one
4-11-23, 8:52pm
If you don't understand how to withdraw or utilize your finances, it is time to talk to someone (not here) that can give the advice you need for your situation. Have you done this?
iris lilies
4-11-23, 9:02pm
If you don't understand how to withdraw or utilize your finances, it is time to talk to someone (not here) that can give the advice you need for your situation. Have you done this?
DH knows but he’s cranky so he doesn’t offer information freely.:~)
See, it is all coming back to me, this stuff that I forget. Seven years ago I rolled the 403B into an account at Vanguard, which is likely an IRA now, but either way, I have to pay tax if I want to take money out of it RIGHT NOW. At age 70.5 I can move money from it to a qualified charity and no tax results (but I will be verifying that with our tax guy.)
6+ months ago, when I was asking around about the best way to set aside money for charitable donations, one of our brokers said we should take money out of our Roth IRA for charitable giving because there’s no taxes, and he sent checks to those accounts.
I have to look at these accounts periodically to refresh my memory, and this is not the week to bother our tax guy about it.
IL, I have used my required minimum withdrawal for charity. I tell the financial person, he sets it up, I sign it on line and it goes to the charities directly. This reduces our income and I would have supported them that much generally. My husband isn't doing that...so the income gets taxed. We're looking into a community foundation that disperses scholarships etc. for the county. It's been around for years and seems to be very reputable, recommended by our accountant, so that is on my list to figure out....has been for several years...same with the information for the lawyer for the wills although they are signed and in effect.
iris lilies
4-12-23, 11:21am
IL, I have used my required minimum withdrawal for charity. I tell the financial person, he sets it up, I sign it on line and it goes to the charities directly. This reduces our income and I would have supported them that much generally. My husband isn't doing that...so the income gets taxed. We're looking into a community foundation that disperses scholarships etc. for the county. It's been around for years and seems to be very reputable, recommended by our accountant, so that is on my list to figure out....has been for several years...same with the information for the lawyer for the wills although they are signed and in effect.
May I ask your age?
iris lilies
4-13-23, 10:03am
I'm 74
I think that is a good way to think of donations, Required Minimum Distributions go the way of charitable organizations.
I am 68 years old and do not even know yet how much that RMD is supposed to be when I hit the age where it is required.
Our Stock person tells us when and how much.
iris lilies
4-14-23, 11:30am
Our Stock person tells us when and how much.
I looked at a chart and plugged in some numbers and holy moly, that is a LOT they are requiring me to take out, assuming the numbers are correct. Oh well, I will worry about that in a few years when it’s required.
I looked at a chart and plug in some numbers and holy moly, that is a LOT they are requiring me to take out, assuming the numbers are correct. Oh well, I will worry about that in a few years when it’s required.
Here's my unsolicited advice--wait until you are 70 1/2 and can take the RMD out as the charitable donation. At that time, you will know better if you need to start saving your RMD for medical/ltc type help.
Cool your jets on big ticket donating until you hit the age when you have to take it out.
This keeps it simple and lets you consolidate accounts or invest them now since they are in a cd, and that may not be what you want, if you have so much that you think you have to withdraw too much. Or it may be. But it gives you time to think and get in control of the situation, so that you understand what you are doing better.
iris lilies
4-14-23, 2:04pm
Here's my unsolicited advice--wait until you are 70 1/2 and can take the RMD out as the charitable donation. At that time, you will know better if you need to start saving your RMD for medical/ltc type help.
Cool your jets on big ticket donating until you hit the age when you have to take it out.
This keeps it simple and lets you consolidate accounts or invest them now since they are in a cd, and that may not be what you want, if you have so much that you think you have to withdraw too much. Or it may be. But it gives you time to think and get in control of the situation, so that you understand what you are doing better.
Ugh, you are probably right about a good approach. Can’t say I’m going to do it, though! My desire for charitable giving is all tied up with, and constrained by, DH. Some of that constraint may not be a bad thing.
I am just annoyed that there appears to be yet more financial decision making coming down the road. This should be a time I can coast. I say often that we are steller at saving money, mediocre at investing (mainly have just had luck and long term gains from compounding interest) and we are downright stupid about drawing down assets.
I should apply to Ramit Sathi’s program. He would knock some sense into us, telling us to spend spend spend. I have not yet heard him address the nursing home cost issue, though.
I comfortably have enough for 7 years in a nursing home without touching joint assets. Maybe I don’t need that much.
[QUOTE=iris lilies;423914]Ugh, you are probably right about a good approach. Can’t say I’m going to do it, though! My desire for charitable giving is all tied up with, and constrained by, DH. Some of that constraint may not be a bad thing.
I am just annoyed that there appears to be yet more financial decision making coming down the road. This should be a time I can coast. I say often that we are steller at saving money, mediocre at investing (mainly have just had luck and long term gains from compounding interest) and we are downright stupid about drawing down assets.
I should apply to Ramit Sathi’s program. He would knock some sense into us, telling us to spend spend spend. I have not yet heard him address the nursing home cost issue, though.
I comfortably have enough for 7 years in a nursing home without touching joint assets. Maybe I don’t need that much.[/QUOTE
Are you counting on nursing home or assisted living, like memory care? Mom pays 11000 but if she gets bumped up to nursing home, then its 20,000. But she still brings in social security and has a rental property, so it is not all coming out of her savings.
I think if you have enough for 7 years in a nursing home, and he does too, since he has more than you, you say, I think you are both fine to not save more for long term care. Since most people only last 2.5 years in assisted living/nursing homes.
I still would not be slinging money at charities when you are trying to figure out how to simplify, consolidate, automate, etc. I'd get to work on those things, then plan to give the rmds to charity if I can still afford it.
With possible dementia in my future, I plan to simplify and automate and have a big master plan when I get to where I am not working and just living off fixed income and savings.
Ramit Sathi has nothing to teach you, since he is at such a different stage of life. In my opinion. Get some good books on drawing down your assets. Someone here I think was LDahl, recommended one, can't remember the name, although I did read it and it was good.
Here you go, Steve Vernon, Money for Life
Retirement income (simplelivingforum.net) (http://www.simplelivingforum.net/showthread.php?19312-Retirement-income&highlight=drawing+assets)
iris lilies
4-14-23, 9:57pm
Here you go, Steve Vernon, Money for Life
Retirement income (simplelivingforum.net) (http://www.simplelivingforum.net/showthread.php?19312-Retirement-income&highlight=drawing+assets)
oh Tybee I don’t know, I have to read the entire book. I don’t know. Maybe I’ll get it and skim it.
i’m figuring $100,000 annually for assisted-living/nursing home because that’s a meld of both of them. You can get nursing home care here in the Midwest for $100,000 with assisted-living less.
oh Tybee I don’t know, I have to read the entire book. I don’t know. Maybe I’ll get it and skim it.
i’m figuring $100,000 annually for assisted-living/nursing home because that’s a meld of both of them. You can get nursing home care here in the Midwest for $100,000 with assisted-living less.
You have enough money, for sure.
Now you just have to simplify and get a master plan going so you are set if you have cognitive decline.
I figure some pre-planning now will stave off a big mess if and when I get to where I can't read a book anymore.
iris lilies
4-15-23, 10:29am
You have enough money, for sure.
Now you just have to simplify and get a master plan going so you are set if you have cognitive decline.
I figure some pre-planning now will stave off a big mess if and when I get to where I can't read a book anymore.
in this latest revision of our trust, and well, I’m seriously considering one of those personal/fiduciary representative services. Probably we won’t do it this time of the Attorney work, but next time around, which is another 5 to 10 years I will probably sign on with one. It saves our executors tons of work. Of course it costs something.
FYI - new RMD age is 72; 73 if you reach 72 after 12/31/22.
iris lilies
1-13-26, 3:12pm
I know we have a couple of threads about RMD‘s, but I’m posting my thoughts here about my own RMD just to keep it on this thread where I can find it in the future.
ChatGPT has been extremely helpful in telling me exactly the month and year is my deadline for an RMD.
I now also understand QCD’s coming out of RMD’s on the amount removed from my IRA.
Isn’t that a mouthful of acronyms!
At first, I was a little depressed to read about how much money has to come out next year in an RMD. Ugh. But then I see that an amount of money I already donate, $10,000 a year, can be subtracted from that RMD and as usual, I pay no taxes on it, so I’m really only gonna have to pay taxes on $10,000 a year.
Of course, DH has an IRA that’s twice as big as mine so that’s going to be a big hit on our household income tax and also will inflate our income and may affect our Medicare bill.
Rats.
But maybe I can use that as a tool to get him to pay even more in charitable donations.
Iris, I finally got my husband to donate his RMD. He balked, but we had to go to extimated tax this year-4 times having to send in money, and that made him change his mind. His indecision was choosing the charities. I just had him do the same as mine, with the idea that we would talk about it later. Our community foundation has been recommended by our accountant to be a place to make a fund that does stuff. No idea how it works, so will need to make that appointment.
iris lilies
1-16-26, 2:16pm
Iris, I finally got my husband to donate his RMD. He balked, but we had to go to extimated tax this year-4 times having to send in money, and that made him change his mind. His indecision was choosing the charities. I just had him do the same as mine, with the idea that we would talk about it later. Our community foundation has been recommended by our accountant to be a place to make a fund that does stuff. No idea how it works, so will need to make that appointment.
yes, this makes sense. If I didn’t already know individual charities here I would probably give to our community fund of Hermann. I know one of the board members, young energetic, competent. I will say that my library had more than a little trouble with the community fund organization in St. Louis so for that reason I probably wouldn’t donate to that group.
It is a little depressing to me to look at my IRA and realize 1/4 to 1/3 of it belongs to the gubmnet unless I take steps to mitigate that.
I do have a Roth IRA but not as much money in it.
frugal-one
1-16-26, 4:05pm
yes, this makes sense. If I didn’t already know individual charities here I would probably give to our community fund of Hermann. I know one of the board members, young energetic, competent. I will say that my library had more than a little trouble with the community fund organization in St. Louis so for that reason I probably wouldn’t donate to that group.
It is a little depressing to me to look at my IRA and realize 1/4 to 1/3 of it belongs to the gubmnet unless I take steps to mitigate that.
I do have a Roth IRA but not as much money in it.
Other than charitable contributions, what are the options? Have to do RMD this year and it makes me ill. I need to go spend but hate shopping. I have a tendency just to make do…. which is stupid, I know.
Frugal, why not just save the RMD, start a new brokerage account?
iris lilies
1-17-26, 1:07pm
Frugal, why not just save the RMD, start a new brokerage account?
that is certainly one option and it’s likely we will be saving some of our RMD money, not sure exactly, but here’s the problem with that: placing it in yet another account that will earn interest (maybe) means that money, which has already been taxed is going to produce more money that will be taxed. That is just irritating to me on a theoretical level.
But there’s probably no getting around it, either it’s donated or goes on to to earn more income. Unless I put it in my mattress.
What if you bought into something in the brokerage like a tax free municipal bond fund? Would that work?
frugal-one
1-17-26, 1:24pm
Frugal, why not just save the RMD, start a new brokerage account?
We’ll see how the tax situation shakes out but for now we have no plans to spend. If I am reading correctly, our income for year has to be or exceed $218,000 (married couple) to increase Medicare. We do have plans for domestic travel and may take some other trips we have not considered previously? Also, charitable contributions will rise. We live WAY below our means so, like others here, in the “blow the dough” phase. Also, like others here, after being frugal for so long, it is difficult to change the mindset.
frugal-one
1-17-26, 1:26pm
What if you bought into something in the brokerage like a tax free municipal bond fund? Would that work?
Checking low tax or tax free vehicles is something to check out. In the past, I found some to be quite risky or unstable. Need to spend more time investigating to be sure.
Trips and charitable contributions sound really good!
I do know that when my mom was in memory care, the cost was all deductible which changed her tax situation a lot: "Memory care expenses generally qualify as medical deductions when:
The individual is in the facility primarily for medical care, including supervision due to cognitive impairment.
A doctor has certified that the person has a chronic illness and needs substantial supervision or assistance with daily living.
You itemize deductions on your tax return.
The expenses are not reimbursed by insurance.
Under these conditions, the entire cost — including meals and lodging — may be deductible because they are part of necessary medical care."
iris lilies
1-17-26, 1:56pm
Other than charitable contributions, what are the options? Have to do RMD this year and it makes me ill. I need to go spend but hate shopping. I have a tendency just to make do…. which is stupid, I know.
Just be aware that you cannot transfer 100% of your RMD to a Donor Advised Fund.
You have to pay tax on your RMD and THEN dump the rest of it into a Donor Advised Fund.
For me, at this stage of my life, there’s no advantage for a Donor Advised Fund. That might’ve been something that would have been good to build when I was younger.
iris lilies
1-17-26, 2:01pm
Trips and charitable contributions sound really good!
I do know that when my mom was in memory care, the cost was all deductible which changed her tax situation a lot: "Memory care expenses generally qualify as medical deductions when:
The individual is in the facility primarily for medical care, including supervision due to cognitive impairment.
A doctor has certified that the person has a chronic illness and needs substantial supervision or assistance with daily living.
You itemize deductions on your tax return.
The expenses are not reimbursed by insurance.
Under these conditions, the entire cost — including meals and lodging — may be deductible because they are part of necessary medical care."
This is good information. I never thought about it. So, when I’m pulling money out of my IRA when I’m in the nursing home to fund my nursing home cost, that money will be taxed, but at least it brings my total tax bill down because I can deduct costs of nursing home.
Just be aware that you cannot transfer 100% of your RMD to a Donor Advised Fund.
You have to pay tax on your RMD and THEN dump the rest of it into a Donor Advised Fund.
For me, at this stage of my life, there’s no advantage for a Donor Advised Fund. That might’ve been something that would have been good to build when I was younger.
Great info. I guess I have to do to QCD directly from the IRA when I get to RMD age, then? Because then I won't have to raise my income?
One cool thing about that is I can give appreciated stocks.
iris lilies
1-17-26, 2:24pm
What if you bought into something in the brokerage like a tax free municipal bond fund? Would that work?
hmmmm. This has possibilities. Thanks for the idea.
iris lilies
1-17-26, 3:16pm
Great info. I guess I have to do to QCD directly from the IRA when I get to RMD age, then? Because then I won't have to raise my income?
That’s the way I understand it.
One cool thing about that is I can give appreciated stocks.
That’s the works if you own stocks. I don’t.
I am reading up on this at Schwab and am now totally confused. I think I will need to seek professional advice on this, because I really don't understand how this works, the QCD to use as RMD.
iris lilies
1-17-26, 4:17pm
I am reading up on this at Schwab and am now totally confused. I think I will need to seek professional advice on this, because I really don't understand how this works, the QCD to use as RMD.
Yeah, I don’t know the details of the recordkeeping involved.
I just assumed that if the government requires me to take out RMD of $20,000, and I tell Vanguard to write checks to qualified charities for some of that, the whole thing shakes out at tax time. But Admittedly, it’s vague in my mind.
I will have to know how it works a year from now because I have to start taking it out in the beginning of 2027. Otherwise I’ll be stuck with two RMD requirements in 2028 and that will kick up our income into the next category of Medicare. And by this, I’m am including DH’s RMDs because he’s born the same year as me although he’s a few months younger.
frugal-one
1-17-26, 6:32pm
Just be aware that you cannot transfer 100% of your RMD to a Donor Advised Fund.
You have to pay tax on your RMD and THEN dump the rest of it into a Donor Advised Fund.
For me, at this stage of my life, there’s no advantage for a Donor Advised Fund. That might’ve been something that would have been good to build when I was younger.
Why is this? Also wondering about the fees.
frugal-one
1-17-26, 6:39pm
I guess the one thing I did right was to first convert all of DH’s IRA to Roth. Only able to convert about 1/3 of mine so now on the hook for those taxes.
One cool thing about that is I can give appreciated stocks.
Since you don't pay capitol gains on tax deferred account, it really doesn't matter what source you use. At least in regard to capitol appreciation. It's all taxed as regular income when you withdraw unless it goes to a qualified charity. I had to think about it a bit, so correct me if that's wrong or didn't understand. I've tried to keep interest bearing investments weighted into my tax deferred accounts and equities in my brokerage account for a similar reason, since one could think capital gains taxes are probably less than ordinary income.
Losses might be a little different picture and strategy, but we've not had many of those for a while.
iris lilies
1-17-26, 7:25pm
Why is this? Also wondering about the fees.
I see no point to a Donor Advised Fund for me. It would not generate enough income to give the large gifts I want to give. At least that is how I picture it.
I give at minimum $10,000 a year out of my IRA. (DH donates another $10,000 from his IRA, and then we give $10,000 from our joint funds.)
But to talk only about my $10,000 donation: in order to get $10,000 a year for donations from a Donor Advised Fund I would have to put in, what, around $100,000? Let’s figure 10% return for the sake of illustration. And while sure that’s doable, it’s not preferable. I don’t want to take that big of a chunk out of my IRA and I would have to pay taxes on it in addition. Ugh.
To me, a Donor Advised Fund makes sense if it is started earlier in life and it has lots of time to grow. That way the principle stays and donations can be made from the income earned.
I don’t know much about fees for a DAF but I think the fees are supposed to be quite low, at least Vanguard advertises its DAF as having low fees, but Vanguard already has low fees
I honestly don't know about the details of all of this, as I have said. It might be worth asking Vanguard or whoever whether you could put 10,000 a year into a DAF and then go from there. But I don't really understand how that would work with the RMD situation, and you are absolutely right that your goal is to not take it as income, not pay the taxes, make the donation in lieu of the RMD if you can. If it were I, I would ask them. Maybe I'll get industrious and call Schwab and ask for what I can do when I start taking RMDs.
I just put a token amount in there a few years ago, and I keep adding and it keeps growing and I keep donating it, down to the initial amount. I could donate it all but I want there to be something left in there when I die, as it has two beneficiaries, both colleges.
frugal-one
1-18-26, 9:54am
Did not fully understand DAF. Will call accountant and Vanguard to determine best options.
iris lilies
1-18-26, 10:12am
I honestly don't know about the details of all of this, as I have said. It might be worth asking Vanguard or whoever whether you could put 10,000 a year into a DAF and then go from there. But I don't really understand how that would work with the RMD situation, and you are absolutely right that your goal is to not take it as income, not pay the taxes, make the donation in lieu of the RMD if you can. If it were I, I would ask them. Maybe I'll get industrious and call Schwab and ask for what I can do when I start taking RMDs.
I just put a token amount in there a few years ago, and I keep adding and it keeps growing and I keep donating it, down to the initial amount. I could donate it all but I want there to be something left in there when I die, as it has two beneficiaries, both colleges.
that is another reason why I don’t care about a DAF, it’s not a vehicle I need to take care of remaining monies in my estate. Our trust takes care of all that. And as I think about it, a DAF would be yet one more thing our executors have to deal with, even if it’s only a simple notification of my death.
There are certainly good reasons for DAF as a vehicle for charitable donations, I’m not saying there’s not, it’s just that needs and goals vary and the DAF may not meet them.
I hope frugal you will let us know what the accountant and Vanguard say, I am really interested to know what to do moving forward when RMDs start.
iris lilies
1-18-26, 10:58am
I need to nail my questions down and in writing, and then send them to our accountant in June, past tax time. He’s now in his busy season so I don’t want to bother him. it is likely our main investment guy will give general advice about this and he probably knows the procedure, but he’s very careful not to offer “official tax advice.”
But I DO need to understand the RMD/QCD procedure because in January 2027 I need to begin those transactions.
And I need to get DH on board because he does our taxes because he barely understands the QCD procedure, or at least he forgot it over last year because I did the same thing last year. Once we start mixing QCDs and RMD’s…ugh.
iris lilies
1-23-26, 1:11pm
Today I had a victory, the first victory in the history of the world (actually my first tax knowledge victory in 35+ years of marriage.) DH was confused about QCDs and kept conflating them with RMDS. I told him NO! I am age 70.5 and I took $10,000 out of my IRA last year for QCDs.
That has NOTHING to do with RMD‘s because we are not old enough for RMD‘s. I kept emphasizing to him a QCD has zero relationship with RMD at this age of our lives. in a couple of years we will be dealing with RMD withdrawals from our IRA.
I had to get back-up from my good buddy ChatGPT to walk us through how this transaction is recorded for tax purposes.
man, I have come a long way in understanding withdrawals from my IRA since my first post on this thread.
iris lilies
1-23-26, 1:33pm
Also, Here’s a very cool thing I learned about QCDs today:
You do not have to itemize your charitable deductions on your taxes in order to have the IRS recognize this as a charitable deduction. There’s a line on long form tax form, line 4, part A. that asks how much you take out. Then part B asks how much of it was taxed.
To emphasize, you can still use the standard deduction AND ALSO claim this QCD.
This seems like a beautiful thing the IRS gave us and I’m sure they will be taking it away shortly. Fk ‘em.
Today I had a victory, the first victory in the history of the world (actually my first tax knowledge victory in 35+ years of marriage.) DH was confused about QCDs and kept conflating them with RMDS. I told him NO! I am age 70.5 and I took $10,000 out of my IRA last year for QCDs.
That has NOTHING to do with RMD‘s because we are not old enough for RMD‘s. I kept emphasizing to him a QCD has zero relationship with RMD at this age of our lives. in a couple of years we will be dealing with RMD withdrawals from our IRA.
.
Great distinction, and really helpful!
I just got something from my college and they were talking about the differences and how they worked. They had a third one--just to be completely confusing--you can get a QCD that is an annuity. So I would donate x,000 today and get an annuity for interest on the money, and then they own the rest when I die.
Just to add another layer of complexity.
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