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.

They are called QCD's, qualified charitable distributions. We now process all our charitable contributions thru our IRS/Keogh plans and it is nontaxable to us. Still reported but zeros out. A separate 1099 should be issued by the plan. The money is sent directly. If it comes in a distribution to you, this does not work. So they check cannot be made out to you.

We got a checkbook from Charles Schwab to use for these donations.

This way we get the full standard deduction and full benefit from the charitable contributions. So win win right now. Under the current administration and Congress, this could change at any time.

Get some good advice about Direct Stock Transfers. You have the stock transferred directly to the qualified charity. You have to estimate about how much money worth of stock you are transferring -- it may turn out to be over or under the exact amount you envision because it can take a day or two for the transfer to take effect and dollar equivalents (prices)change daily and hourly.

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Originally Posted by Rachel

Get some good advice about Direct Stock Transfers. You have the stock transferred directly to the qualified charity. You have to estimate about how much money worth of stock you are transferring -- it may turn out to be over or under the exact amount you envision because it can take a day or two for the transfer to take effect and dollar equivalents (prices)change daily and hourly.

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I think of stock transfers to charities as big league stuff for significant donations.

The small organizations I donate to have no ability to manage stocks.

The largest single donation we will make this year is $10,000. All others are $1,000 -$2,000.

Another reason I like my Donor Advised Fund. I donate appreciated stock into it, then they sell it and put it into their fund, and I get the donation contribution amount when I donate, but I don't pay capital gains on it, ever.

so I just donated one share of British Tobacco, worth 45 dollars, and they put that into the bigger fund, then I recommend a donation to whomever I want, and they get cash, not the stock itself.

Asked Vanguard what a qualified charity was…. told me to ask the charity? Who is “they” in donor advised fund? A brokerage firm or?

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Originally Posted by frugal-one

Asked Vanguard what a qualified charity was…. told me to ask the charity? Who is “they” in donor advised fund? A brokerage firm or?

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a qualified charity has 501(c)(3) status

Tybee will tell you more about her donor advised fund. I looked into it for my Vanguard account and whike there’s nothing wrong with it, I just prefer to handle my donations myself individually each year. The big brokerage houses have donor advised funds they manage for their clients.

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Originally Posted by frugal-one

Asked Vanguard what a qualified charity was…. told me to ask the charity? Who is “they” in donor advised fund? A brokerage firm or?

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Also, related to this: at age 70.5 we can take $ out of an IRA and give it to a qualified charity without paying tax. Vanguard writes a check made out to the charity, mails it to me, and I make a copy for my tax records and mail it to the charity.

Here's the one at Schwab:
DAFgiving360 | Donor-Advised Fund | Charles Schwab

Here's the one at Fidelity:
Fidelity Charitable | Official Site

So you set up the donor advised account with your brokerage, and then you contribute to it. When you contribute to it, that is the tax related deduction. At that point, it ceases being your money and becomes part of the charitable fund's money.

But the money sits there in your fund, with your fund's name on it, and then you recommend grants. You submit your recommendation for the grant, then Schwab approves it and sends it.

I think only one time did they reject the recommendation because they could not find a person to talk to and no one had donated there before. They do check them all and won't donate if it does not check out.

Minimum donation seems to be 50 dollars. But I can contribute any amount. I choose to contribute appreciated stock rather than cash so that I don't have to pay capital gains on the stock and the money goes farther.

Tybee, that’s interesting that your Schwab account person rejected a recommendation for a donation. I can’t imagine that they could find someone to talk to at one of my little charities like “Ferals In Peril” which is the stray cat organization for my town. I would think 75% of the ones I donate to have never been given donations from a Schwab account.

did you follow up on that? It never occurred to me that the donor advised recommendation would not be honored. The more I think about it, the more I think that really stinks

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Originally Posted by iris lilies

Tybee, that’s interesting that your Schwab account person rejected a recommendation for a donation. I can’t imagine that they could find someone to talk to at one of my little charities like “Ferals In Peril” which is the stray cat organization for my town. I would think 75% of the ones I donate to have never been given donations from a Schwab account.

did you follow up on that? It never occurred to me that the donor advised recommendation would not be honored. The more I think about it, the more I think that really stinks

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They reached out and asked me for a name and they would have called and followed up, but I didn't have a name, and I did not know of the charity personally, and suspect that it wasn't off the ground yet, and probably did not have their EIN number yet. But if I had had a name, they would have done the calling, etc., and they emailed and called me to try to make it work out. About three times, actually. They want to honor every request. But the charity wasn't local to me, and I just found something else similar, as I wanted to honor the work my mom did in shipbuilding in WWII. I just did not have a person's name for them to call and follow up.

I looked up Ferals in Peril and it is on their list already, so that would be fine. I think anything with an EIN number is usually fine.

It was on me that I did not chase down the Liberty Ship fund from my hometown.

Here is their explanation of the process:

DAFgiving360 is a tax-exempt public charity. Contributions to donor-advised fund accounts at DAFgiving360 are irrevocable gifts to charity. We use the word “recommend” because once assets have been contributed into an account and accepted by DAFgiving360, DAFgiving360 has legal control of the assets in the account. Account holders and additional account users have account advisory privileges, as described in our Program Policies, which include the ability to recommend how assets are invested and to recommend grants to eligible charities. Before approving the grants, DAFgiving360 performs due diligence to verify the eligibility of each recommended grant recipient.

Here is a practical question about RMD’s: For those of you who take the money regularly, in what form do you get it?

I ask because Vanguard, which holds my main IRA doesn’t seem to be able to transfer money electronically. They send checks.

Next January I have to start taking an RMD (really it’s the following year that is required, but I’m doing it next year so that I don’t have two RMD’s in the same calendar year.)

I’m thinking if they have to send that big check through the mail, that is not good. Our mail service is so bad. Now there are credible reports that postal workers are washing checks in St. Louis. I’m beginning to hate the post office quite a bit even though our local Hermann post office and its employees are very nice.

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Originally Posted by iris lilies

Here is a practical question about RMD’s: For those of you who take the money regularly, in what form do you get it?

I ask because Vanguard, which holds my main IRA doesn’t seem to be able to transfer money electronically. They send checks.

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I'm not yet taking RMD's but I do take a chunk of money out of our Vanguard accounts once in a while. It's sent directly to my bank account, I've never received a check from Vanguard.

It looks like I can click a button to transfer the funds from my retirement accounts at my brokerage to one of my slush-fund accounts there. It's so easy that when I'm moving funds around between other accounts, I always triple-check to make sure I'm not accidentally touching one of the retirement accounts.

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Originally Posted by Alan

I'm not yet taking RMD's but I do take a chunk of money out of our Vanguard accounts once in a while. It's sent directly to my bank account, I've never received a check from Vanguard.

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Great! This is a relief. I guess I assumed Vanguard did checks only because that’s what they do for the QCD’s I set up, but of course they wouldn’t have bank information for those charitable organizations so – – doh. I wasn’t thinking it through

but I might have my RMD transferred to another Vanguard index fund anyway when the time comes.

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in what form do you get it?

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Our end of month inherited IRA RMD funds are in a Vanguard brokerage account so the end of month payment goes to a non-IRA account settlement fund. We also have a savings acct at Vanguard so it could be sent there if we chose that option.

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Originally Posted by iris lilies

Here is a practical question about RMD’s: For those of you who take the money regularly, in what form do you get it?

I ask because Vanguard, which holds my main IRA doesn’t seem to be able to transfer money electronically. They send checks.

Next January I have to start taking an RMD (really it’s the following year that is required, but I’m doing it next year so that I don’t have two RMD’s in the same calendar year.)

I’m thinking if they have to send that big check through the mail, that is not good. Our mail service is so bad. Now there are credible reports that postal workers are washing checks in St. Louis. I’m beginning to hate the post office quite a bit even though our local Hermann post office and its employees are very nice.

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Vanguard deposits electronically to whatever account or bank you desire.