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Vanguard: Important information about your [IRA] checkwriting service

Dave
in Fund Discussions
Dear Vanguard Client,

We're writing to inform you that Vanguard will be permanently discontinuing checkwriting services for your IRA account on Sept‍ember 2‍4,‍ 20‍25. This change is part of our ongoing efforts to enhance the security of your retirement savings. We've noticed that many clients have already transitioned to more secure and convenient options, such as electronic bank transfers.

What you need to know

= Checkbook orders will no longer be accepted after Ju‍ly 1, ‍202‍5. If you need new checks before the service ends, please place your order before this date.
= Checkwriting service will be fully removed on IRAs on Sept‍ember 2‍4, ‍20‍25. After this date, your checks will not be processed.
= Nonretirement accounts remain unaffected by this change.

Comments

  • Dave
    So: How are we supposed to write QCD checks to our favorite charity?
  • Observant1
    It appears Vanguard can cut a QCD check for you.
    https://investor.vanguard.com/investor-resources-education/faqs/how-do-i-take-a-qualified-charitable-distribution-qcd
  • Dave
    Yes, but that requires planning and a time cycle. What if I'm at a small town's (qualified) museum and I want to share the love by writing a quick QCD check?

    I'm hoping they (Vanguard) change their position. I called and their phone rep claimed this did not apply to existing accounts... Right. Read the letter. No mention of existing or new accounts.
  • msf
    There is a downside in making QCDs by writing your own checks from your IRA. (That's what you can no longer do at Vanguard as of Sept.)

    Roth conversions can only be done after you meet your annual RMD requirement (if any). When Vanguard, or Fidelity, or any custodian cuts QCD checks, the QCD/RMD withdrawals are as of that date. So you can do a Roth conversion immediately thereafter. But if you write your own checks, your RMD won't be met until those checks actually clear. That could take days, weeks, or even months.
  • Dave
    msf said:

    Roth conversions can only be done after you meet your annual RMD requirement

    Not strictly true. Roth conversions ( a taxable event ) can be done at any time. As can QCD's. The caveat is that, if required, the full RMD amount ( taxable ) must still be taken ( sometime ) during the applicable tax year.

    The conversions and/or QCD's do not count towards the total RMD amount. And I say 'total' because, if you have more than one IRA ( Traditional and/or Rollover ), the RMD does not have to be split proportionally, the total amount required *can* be taken from only one account or in any other ratio you may desire. The RMD is determined based on the COB December 31st total of *all* your Traditional/Rollover IRA's.

    On the other hand, 401's must be RMD'd individually/seperately.

    [ IMHO ]

    /dave
  • msf
    The conversions and/or QCD's do not count towards the total RMD amount

    Fidelity: "QCDs can be counted toward satisfying your required minimum distributions (RMDs) for the year, as long as certain rules are met."

    https://www.fidelity.com/retirement-ira/required-minimum-distributions-qcds

    Roth conversions ( a taxable event ) can be done at any time. ... The caveat is that, if required, the full RMD amount ( taxable ) must still be taken ( sometime ) during the applicable tax year.

    I used to think so also. But the IRS is clear on this point. Money withdrawn from an IRA before the annual RMD is met is ineligible to be put back into any IRA (whether traditional or Roth). The RMD must come first.

    Ed Slott (site): " All IRA RMDs Must Be Satisfied Prior to Doing a Roth Conversion. ... If a person has multiple IRAs, even if they are held at different custodians, the total aggregated IRA required minimum distribution (RMD) must be withdrawn before any Roth IRA conversion (or 60-day rollover) can be completed. "

    https://irahelp.com/slottreport/new-rule-all-ira-rmds-must-be-satisfied-prior-to-doing-a-roth-conversion/

    The RMD is determined based on the COB December 31st total of *all* your Traditional/Rollover IRA's.

    Usually but not always. For example, if you're in the process of doing a 60 day rollover at the end of the year (pulling money out of your IRA on Dec 29th and rolling it back in on Jan 3rd), you have to add back that money to the COB Dec 31st balances in calculating your RMD.

    IRS Pub 590-B: "Outstanding rollovers. The IRA account balance is adjusted by outstanding rollovers that aren't in any account at the end of the preceding year."
    https://www.irs.gov/publications/p590b#en_US_2024_publink100090063

    On the other hand, 401's must be RMD'd individually/seperately

    Though you can aggregate 403(b) withdrawals for RMDs.
    https://www.irs.gov/retirement-plans/rmd-comparison-chart-iras-vs-defined-contribution-plans
  • yogibearbullyogibearbull
    There are many sources that point out that the first withdrawals from T-IRA are assumed to be RMDs. This can create trouble sometimes. For example, it you do Roth Conversion as the 1st transaction, it won't really count as Conversion, but contribution - so, the amount may be over the limit or ineligible if there are no earnings.

    Allowed QCDs may be more than required RMDs. So, proper planning of sequencing can be done.
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