When taking money out of an IRA account

[iris lilies]

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]

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.

[Tybee]

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]

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]

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.

[Tybee]

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]

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]

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]

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.

[Rogar]

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.