RMD's

I have a few years to go until I am 73 1/2, but those of you who have to take RMD's, how do you do it? Do you take it out in one lump sum at the start of the year to be sure to get it done or do you take it out monthly?

When people talk about 4% rule, or just taking out income to preserve capital, then aren't they kind of stuck with the RMD amount at that point? So isn't it kind of moot?

I've been taking money out of a non IRA account each year to live on, since the distributions won't get added to our income. But then in a few years the IRA will be higher and I will have to take more of it if it is growing in there.

Curious as to what others do.

I've not started yet, but will need to get to it soon. I've had to take withdrawals from an inherited IRA and have generally called my IRA custodian, which for me is Fidelity, and asked for help. They have helped me navigate through their web site to set up the various options. My take is that as long as you meet the RMD requirements, you can customize it to suit you. I've taken mine quarterly, but you could set it up to take it monthly, or even a one time yearly sum any time during the year. My accountant has suggested that if you want to time the market you could take it all at once when you think the market is high, assuming you have equities. I have some big bills around the first of the year, like taxes and insurances, so a little quarterly pulse at the first of the year was helpful, but it basically all comes out of the same pocket.

I'm not sure about your 4% question. You can always take more than the RMD or just because you take the RMD you can still invest it or put into savings in a regular account if that meets your plan. Maybe that's not what you're asking.

We have a recently inherited IRA and took out the first year's in one lump. It hurts to have to pay taxes on the additional income, so I figure we should just go on a nice trip every year or put it in the emergency fund/reinvest until needed. My FIL used to take his RMD in November of every year and use it to give out Christmas checks. There is a real learning curve to RMDs - that's for sure.

DH inherited a small IRA. We used the money for a few years now to finance our wintering in TX. Took the money as a lump sum at the beginning of the year.

Going to see a tax accountant (after a short getaway) to determine the best tax way to handle withdrawals and determine other tax advantageous options. Hope it is helpful. Talked to a financial advisor recently that we basically told to pound sand. He was an unrealistic moron… one example, stating our social security would increase about 45% in 5 years! Ha! With the current regime we will be lucky to continue to receive it at all or, at least, at the level currently.

Thanks! I know the inherited IRAs have to be emptied in 10 years, so that is very similar, just a shorter time frame. I inherited about five thousand dollars this way and Mother's conservator said it made more sense to take it as a lump sum and end it, rather than rolling it over into its own inherited IRA, so I don't have to fuss with that.

Rogar, yes, what you said about the 4%,and conceptually, it's possible to just bank anything I don't need to live on. I could also use it for charitable giving so as to keep the amount of income down. I could transfer directly to my donor advised fund, although it would just be a portion.

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Originally Posted by frugal-one

DH inherited a small IRA. We used the money for a few years now to finance our wintering in TX. Took the money as a lump sum at the beginning of the year.

Going to see a tax accountant (after a short getaway) to determine the best tax way to handle withdrawals and determine other tax advantageous options. Hope it is helpful. Talked to a financial advisor recently that we basically told to pound sand. He was an unrealistic moron… one example, stating our social security would increase about 45% in 5 years! Ha! With the current regime we will be lucky to continue to receive it at all or, at least, at the level currently.

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He does not sound very good at all. That's completely unreasonable. Mine has increased over the years but I have also been working, so that makes it higher, although not much. But mine is really low. If ss were to decrease, a lot of us will be in trouble, and planning will have to change a lot.

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Originally Posted by pinkytoe

We have a recently inherited IRA and took out the first year's in one lump. It hurts to have to pay taxes on the additional income, so I figure we should just go on a nice trip every year or put it in the emergency fund/reinvest until needed. My FIL used to take his RMD in November of every year and use it to give out Christmas checks. There is a real learning curve to RMDs - that's for sure.

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That's a cool idea, to do it in November. That has become the start of my financial year with respect to tithing and planning for the next year. Then you can tie up everything in December and deal with Christmas and be ready for the new year ahead. That would fit in with my current way of doing things.

I have a friend who just took her first RMD and donated it all to charity. Her quote went something like, I'm no giving a cent more in taxes to the current administration. I plan to give some of mine to charity, but undecided how much.

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Originally Posted by Rogar

I have a friend who just took her first RMD and donated it all to charity. Her quote went something like, I'm no giving a cent more in taxes to the current administration. I plan to give some of mine to charity, but undecided how much.

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so are you saying the RMD’s when passed to a qualified charity are not taxed at all?

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Originally Posted by iris lilies

so are you saying the RMD’s when passed to a qualified charity are not taxed at all?

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That's the impression I have, but more from a word of mouth source. Could definitely be fact checked?

My accountant said to have whatever portion of the RMD made out as a check to XYZ charity, sent to me, and then sent to the charity. So it would never be income directly to me? I have an appointment with Fidelity coming up and will ask for more information.