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It was bumped out from 70 to 72. Is it bumped out another year? There is the option, I understand, to wait until after the required age, but then in that year which follows, you'd have to take TWO RMDs, eh? I just saw a thing at Schwab, saying you must begin at age 73. I'll be 70 in July. I can't believe I just typed those words.
Frequent changes in the RMD rules are confusing. For tax-deferred accounts (T-IRA, 401k, 403b), the RMD age is 73 now (was 72 in 2023, 70.5 in 2020) and it will remain so until 2033. The RMD amount depends on the yearend balances, age-related IRS factor, and other factors such as marital status, very young spouse, beneficiaries. The 1st RMD can be delayed to April 1 of the following year but beware of the tax impact of double RMDs then. The RMD can be postponed if working. (There is a special 55.0-59.5 rule that avoids 10% penalty for premature withdrawals from a current 401k/403b; not so for old 401k/403b or T-IRA). The RMDs from T-IRAs can be aggregated and taken from any one T-IRA, and it’s similar for 403b, but not for 401k. There are different rules for inherited accounts for spouses, nonspouses, trusts, and whether the deceased had started taking the RMDs. The QCDs are allowed from T-IRAs. The Roth IRAs no longer require RMDs. (R-IRA rules are simple in retirement if 5 years beyond Roth Conversions, but nightmarish otherwise.)
@Crash. I'm in my 3rd year of RMDs, and the complexities of it all was something I worried about going into it the first time. I don't know how other major brokers are, but Schwab makes setting up RMDs VERY EASY. They will tell you how much and when you need to withdraw, no math needed on your part.
I have mine set up to take 1/12 of the annual total each month, and how much % I want to withhold for taxes, including state. You can choose the percentage; Schwab automatically sends this to the gov and your history page will show all the numbers each month.
I have the net amount transferred automatically to my taxable account cash position and reinvest or withdraw from there as needed.
Rollover IRA is just a label for convenience. It's a T-IRA.
With multiple T-IRAs: 1. Find yearend balance for T-IRA#1, calculate the RMD#1, roundup; 2. Repeat for T-IRA#2, T-IRA#3, etc; 3. Add them up (RMD#1 + RMD#2 + RMD#3 + ), and that's the RMD you can take from any one of the T-IRA.
Glad to read your words, @yogibearbull. @Mona. @MikeM. @Low_Tech. Yes, I'm with Schwab. Glad the process sounds so painless. I'll set it up from the website. The office downtown has proven to be rather useless, anyhow. They won't even answer calls or respond to messages. Grade: F.
BTW, I don't use RMD services at funds/brokerages. But I do subscribe to some for information only, not execution. I calculate my own RMDs and take them as regular withdrawals. When RMDs apply, the 1st withdrawals from T-IRA or 401k/403b are assumed to be RMDs anyway. I used to take RMDs early in January, but after the 2020 fiasco, I now take them in mid/late-year. This despite knowing that we won't see ad-hoc reversal of RMDs again in my lifetime.
One of the reasons why I consolidated all of accounts at Fidelity was t simplify the RMD process. Although we haven’t started distributions yet, Fidelity will tell us when RMDs are needed and do all of the calculations.
One of the reasons I went with Roth conversions years ago. @Tarwheel makes a good point. If possible, try to keep all your funds subject to RMD at the same place. Simplifies matters. The calculations shouldn’t be hard. There’s a multitude of free websites you can pull up that will factor in birth date, etc. and provide the minimum RMD for a given year.
I've been taking RMDs since 2007. Tax withholding has always been a question I think about each year. Since starting RMDs, I have used the Electronic Tax Payment System,(EFTPO), to make automatic quarterly payments. After filing our tax return for the previous year, generally in March, I set up the quarterly payments for the current year.
I see that many of you have the brokerage firm withhold tax from the RMD. Is that an easier way to handle it? You would still have to contact the brokerage firm each year to change the amount, would you not?
@Mona, if you add up all T-IRA balances, apply the RMD divisor, and then round the results, there are some cases when you could be short a few cents for some RMD.
So, it is safer to calculate each RMD, round to 2 decimal places, and then add them up.
I just round up each RMD to whole dollar amounts and then add.
Vanguard calculates our RMD each year and sends each of us the total amounts and the amounts coming out of each fund, however I also calculate them for a double check. We have the RMD taken out proportionally from each of our IRA funds
Another option to consider is an annuity. We are considering investing my wife’s IRA in an annuity to simplify matters. It accounts for about 15% of our total retirement accounts, so we wouldn’t be locking up everything. An annuity would satisfy the RMDs for that account and would provide guaranteed payments for the rest of our lives, with no concerns about market conditions. The payout rate is pretty high right now due to rising interest rates.
I've been taking RMDs since 2007. Tax withholding has always been a question I think about each year. Since starting RMDs, I have used the Electronic Tax Payment System,(EFTPO), to make automatic quarterly payments. After filing our tax return for the previous year, generally in March, I set up the quarterly payments for the current year.
I see that many of you have the brokerage firm withhold tax from the RMD. Is that an easier way to handle it? You would still have to contact the brokerage firm each year to change the amount, would you not?
" . . . to change the amount . . . "
The RMD for the year? Schwab calculates it automatically. The percent of tax you want taken out for Fed and state will stay the same unless you change it.
I always round my monthly RMD up to some sort of even number, so then the annual amount is also an even number and will be few hundred more than I actually need - just to be on the safe side.
Being self-employed, I paid quarterly tax estimates for 36 years. Now I had the choice of monthly payments so I took that route, it's less shocking than writing out those big checks. I actually got a tax refund this year, first time since 1981. I am going to tweak the percent taken out to get that as close to zero as is reasonable.
i've been 70 in july, too -- the 24th. so you're going to set it up now, to go into effect when?
Oh, heavens, no. Not yet. But I've been following some decent advice without realizing it, for a few years, already: Take a small chunk from the T-IRA to reduce the raw dollar amount in that IRA, in order to at least slightly reduce the amount of the RMD, when the time comes. We've been growing the taxable account, since we don't owe federal 1040 tax, anyhow.
Rollover IRA is just a label for convenience. It's a T-IRA.
With multiple T-IRAs: 1. Find yearend balance for T-IRA#1, calculate the RMD#1, roundup; 2. Repeat for T-IRA#2, T-IRA#3, etc; 3. Add them up (RMD#1 + RMD#2 + RMD#3 + ), and that's the RMD you can take from any one of the T-IRA.
What is wrong with the math to have institution A figure out RMD#1 based on their year-end balance and institution B figure out RMD#2 based on their year-end balance and then take those amounts from each institution?
@Mona, nothing wrong with that. Most people do just that - i.e. take appropriate RMDs from each tax-deferred account. They can do that themselves, or let the institution(s) do it for them.
But the IRS provided additional flexibility to aggregate RMDs for all T-IRAs and to take all from just one T-IRA.
Also allowed is the aggregation of RMDs for all 403b and to take all from only one 403b.
But then, the IRS doesn't allow this aggregation for 401k.
Laws/Rules aren't as consistent as one may expect.
Comments
Frequent changes in the RMD rules are confusing. For tax-deferred accounts (T-IRA, 401k, 403b), the RMD age is 73 now (was 72 in 2023, 70.5 in 2020) and it will remain so until 2033. The RMD amount depends on the yearend balances, age-related IRS factor, and other factors such as marital status, very young spouse, beneficiaries. The 1st RMD can be delayed to April 1 of the following year but beware of the tax impact of double RMDs then. The RMD can be postponed if working. (There is a special 55.0-59.5 rule that avoids 10% penalty for premature withdrawals from a current 401k/403b; not so for old 401k/403b or T-IRA). The RMDs from T-IRAs can be aggregated and taken from any one T-IRA, and it’s similar for 403b, but not for 401k. There are different rules for inherited accounts for spouses, nonspouses, trusts, and whether the deceased had started taking the RMDs. The QCDs are allowed from T-IRAs. The Roth IRAs no longer require RMDs. (R-IRA rules are simple in retirement if 5 years beyond Roth Conversions, but nightmarish otherwise.)
I have mine set up to take 1/12 of the annual total each month, and how much % I want to withhold for taxes, including state. You can choose the percentage; Schwab automatically sends this to the gov and your history page will show all the numbers each month.
I have the net amount transferred automatically to my taxable account cash position and reinvest or withdraw from there as needed.
"The RMDs from T-IRAs can be aggregated and taken from any one T-IRA"
With Traditional IRAs and Rollover IRAs at two different institutions, how do you figure out the RMD?
With multiple T-IRAs:
1. Find yearend balance for T-IRA#1, calculate the RMD#1, roundup;
2. Repeat for T-IRA#2, T-IRA#3, etc;
3. Add them up (RMD#1 + RMD#2 + RMD#3 + ), and that's the RMD you can take from any one of the T-IRA.
I calculate my own RMDs and take them as regular withdrawals. When RMDs apply, the 1st withdrawals from T-IRA or 401k/403b are assumed to be RMDs anyway.
I used to take RMDs early in January, but after the 2020 fiasco, I now take them in mid/late-year. This despite knowing that we won't see ad-hoc reversal of RMDs again in my lifetime.
In your point 1, what do you mean by "roundup"?
I see that many of you have the brokerage firm withhold tax from the RMD. Is that an easier way to handle it? You would still have to contact the brokerage firm each year to change the amount, would you not?
So, it is safer to calculate each RMD, round to 2 decimal places, and then add them up.
I just round up each RMD to whole dollar amounts and then add.
The RMD for the year? Schwab calculates it automatically. The percent of tax you want taken out for Fed and state will stay the same unless you change it.
I always round my monthly RMD up to some sort of even number, so then the annual amount is also an even number and will be few hundred more than I actually need - just to be on the safe side.
Being self-employed, I paid quarterly tax estimates for 36 years. Now I had the choice of monthly payments so I took that route, it's less shocking than writing out those big checks. I actually got a tax refund this year, first time since 1981. I am going to tweak the percent taken out to get that as close to zero as is reasonable.
But the IRS provided additional flexibility to aggregate RMDs for all T-IRAs and to take all from just one T-IRA.
Also allowed is the aggregation of RMDs for all 403b and to take all from only one 403b.
But then, the IRS doesn't allow this aggregation for 401k.
Laws/Rules aren't as consistent as one may expect.