Are you taking 2020 RMD anyhow?

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AAA
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Are you taking 2020 RMD anyhow?

Post by AAA »

So for 2020 we don't have to take RMD's but you of course could still choose to do so. The only reasons I could think of for taking them was if you needed or wanted the funds or expected taxes to go up in the future. But reading on Kiplinger's website, I came across the following and was wondering what people thought about it:

Delaying distributions may sound like a good idea, but you should also consider the long-term effects. By not taking distributions, you won’t reduce your retirement account balance this year. This could potentially increase the amount of your future RMDs. Keep in mind that your RMD amount is based on your balance on Dec. 31 of the previous year and your life expectancy, so a higher percentage is required as you get older. The combination of the potentially higher balance and the higher withdrawal percentage may bump you into a higher tax bracket and/or trigger higher Medicare premiums in future years.

With this in mind, you might consider a middle-ground approach. That could mean taking a distribution this year but limiting it to an amount that won’t move you into a higher tax bracket or trigger higher Medicare premiums.
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cheese_breath
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Re: Are you taking 2020 RMD anyhow?

Post by cheese_breath »

You can choose to take, or not take any amount. Maybe you should make your title non-RMD specific.
The surest way to know the future is when it becomes the past.
MrJedi
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Re: Are you taking 2020 RMD anyhow?

Post by MrJedi »

If you don't need the money you can consider doing a Roth conversion.
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Artsdoctor
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Re: Are you taking 2020 RMD anyhow?

Post by Artsdoctor »

Tax rates are incredibly low for many investors. It might be true that you don't have to take an RMD, but that doesn't necessarily mean that you shouldn't. If the tax ramifications will be meager, take advantage of that and get the money out of the IRA (either by sending it to your taxable account or converting it to a Roth).
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1210sda
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Re: Are you taking 2020 RMD anyhow?

Post by 1210sda »

I had notified various religious and charity groups at the beginning of the year that I would support them. Therefore I took RMD's for the promised amount and QCD's for the same amount.

RMD minus QCD = zero taxes.

No IRS obligation, but a moral obligation.
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AAA
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Re: Are you taking 2020 RMD anyhow?

Post by AAA »

cheese_breath wrote: Wed Sep 23, 2020 1:27 pm You can choose to take, or not take any amount. Maybe you should make your title non-RMD specific.
Huh?
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GerryL
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Re: Are you taking 2020 RMD anyhow?

Post by GerryL »

I executed my QCDs early in the year, before the RMD holiday was announced. Decided to keep those as-is rather than paying them back from other funds and claiming the donations as a charitable deduction.

(As I noted elsewhere) I was planning to run some scenarios to see how much I should possibly take out of my IRA to cover withholding (since I have not been doing estimated tax payments), but I ran a single scenario and found that my tax hit will be low enough that I don't need to pre-pay taxes.

No plans to take any more from the IRA. If/when my RMDs get "too big" I am able to make adjustments to taxes and MAGI using QCDs.

* I count 4 different acronyms above. Does that make me a bad person?
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GerryL
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Re: Are you taking 2020 RMD anyhow?

Post by GerryL »

AAA wrote: Wed Sep 23, 2020 2:23 pm
cheese_breath wrote: Wed Sep 23, 2020 1:27 pm You can choose to take, or not take any amount. Maybe you should make your title non-RMD specific.
Huh?
I've been referring to 2020 withdrawals from my IRA as an un-RMD. (Since the "R" stands for "required," and it's not.)
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Electron
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Re: Are you taking 2020 RMD anyhow?

Post by Electron »

I will probably skip my RMD this year. A spreadsheet analysis for my case and divisor shows that all future RMDs would be 3.9% higher as a result assuming an annual return of 4%.

Overall, that may not be that much of a penalty as higher investment returns have a much larger effect. If the investment return every year was increased from 4% to 6%, the increase in RMD would be higher every year apparently from the compounding effect. The RMD increases per year for my case were the following: 1.99%, 4.03%, 6.11%, 8.23%, 10.40%, 12.62%, 14.88%, 17.19%, 19.56%, 21.98%, 24.45% ...

Roth Conversions might be an alternative worth exploring for those who don't need the RMD.
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Skiandswim
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Re: Are you taking 2020 RMD anyhow?

Post by Skiandswim »

Skipping RMD on inherited IRA and instead increased Roth IRA conversion.
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AAA
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Re: Are you taking 2020 RMD anyhow?

Post by AAA »

GerryL wrote: Wed Sep 23, 2020 2:54 pm
AAA wrote: Wed Sep 23, 2020 2:23 pm
cheese_breath wrote: Wed Sep 23, 2020 1:27 pm You can choose to take, or not take any amount. Maybe you should make your title non-RMD specific.
Huh?
I've been referring to 2020 withdrawals from my IRA as an un-RMD. (Since the "R" stands for "required," and it's not.)
That's true. Ha. I could have been more precise.
kaneohe
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Re: Are you taking 2020 RMD anyhow?

Post by kaneohe »

skipping RMDs this yr.....hoping to qualify for stimulus credit as well as a 1 yr relief from Medicare IRMAA and taxes on RMD.
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cheese_breath
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Re: Are you taking 2020 RMD anyhow?

Post by cheese_breath »

AAA wrote: Wed Sep 23, 2020 2:23 pm
cheese_breath wrote: Wed Sep 23, 2020 1:27 pm You can choose to take, or not take any amount. Maybe you should make your title non-RMD specific.
Huh?
What I mean is there is no RMD for 2020. You could calculate what the RMD would have been if it hadn't been waved, and withdraw that precise amount. But it still isn't an RMD.
The surest way to know the future is when it becomes the past.
hbdad
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Re: Are you taking 2020 RMD anyhow?

Post by hbdad »

Sorry for the nube question but how would I do a Roth conversion from my inherited IRA? I have both with Vanguard. Since there is no RMD, do I just decide how much I want to convert? Is it as easy as calling Vanguard and telling them to convert X amount?
dropdx
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Re: Are you taking 2020 RMD anyhow?

Post by dropdx »

MrJedi wrote: Wed Sep 23, 2020 1:51 pm If you don't need the money you can consider doing a Roth conversion.
By "Roth conversion" do you just mean take the RMD and contribute it to your Roth IRA?
kaneohe
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Re: Are you taking 2020 RMD anyhow?

Post by kaneohe »

hbdad wrote: Wed Sep 23, 2020 8:45 pm Sorry for the nube question but how would I do a Roth conversion from my inherited IRA? I have both with Vanguard. Since there is no RMD, do I just decide how much I want to convert? Is it as easy as calling Vanguard and telling them to convert X amount?
Is the IRA inherited from a spouse or non-spouse? If non-spouse you can not convert to Roth
https://www.schwab.com/resource-center/ ... a-now-what which suggests but does not say it in plain English.
hbdad
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Re: Are you taking 2020 RMD anyhow?

Post by hbdad »

kaneohe wrote: Wed Sep 23, 2020 9:08 pm
hbdad wrote: Wed Sep 23, 2020 8:45 pm Sorry for the nube question but how would I do a Roth conversion from my inherited IRA? I have both with Vanguard. Since there is no RMD, do I just decide how much I want to convert? Is it as easy as calling Vanguard and telling them to convert X amount?
Is the IRA inherited from a spouse or non-spouse? If non-spouse you can not convert to Roth
https://www.schwab.com/resource-center/ ... a-now-what which suggests but does not say it in plain English.
Non-spouse. Thanks.
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celia
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Re: Are you taking 2020 RMD anyhow?

Post by celia »

cheese_breath wrote: Wed Sep 23, 2020 8:09 pm What I mean is there is no RMD for 2020. You could calculate what the RMD would have been if it hadn't been waved, and withdraw that precise amount. But it still isn't an RMD.
Why would you withdraw to taxable (unless you needed the money for living expenses) when you could convert that amount instead and pay the same amount of taxes either way?

hbdad wrote: Wed Sep 23, 2020 8:45 pm Sorry for the nube question but how would I do a Roth conversion from my inherited IRA?
You CAN’T convert an Inherited IRA.

The poster appears to have to take RMDs from both her/his IRA and an Inherited IRA. She is thinking of not touching the Inherited this year which would leave more room in her tax bracket to convert more of her own IRA instead, thus ending up with the same tax bill.


As for me me, we don’t need the RMDs for living expenses but this year we withdrew a lot more in QCDs than the RMDs would be since there are so many more people who need help than usual. (We favored food banks.)
MrJedi
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Re: Are you taking 2020 RMD anyhow?

Post by MrJedi »

dropdx wrote: Wed Sep 23, 2020 9:00 pm
MrJedi wrote: Wed Sep 23, 2020 1:51 pm If you don't need the money you can consider doing a Roth conversion.
By "Roth conversion" do you just mean take the RMD and contribute it to your Roth IRA?
No, conversion not contribution. Since there is no RMD, you can instead use your now lower marginal tax rate for some Roth conversions.
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cheese_breath
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Re: Are you taking 2020 RMD anyhow?

Post by cheese_breath »

celia wrote: Wed Sep 23, 2020 9:26 pm
cheese_breath wrote: Wed Sep 23, 2020 8:09 pm What I mean is there is no RMD for 2020. You could calculate what the RMD would have been if it hadn't been waved, and withdraw that precise amount. But it still isn't an RMD.
Why would you withdraw to taxable (unless you needed the money for living expenses) when you could convert that amount instead and pay the same amount of taxes either way?...
Of course that would make more sense if you didn't need the money now. I was focusing on the terminology of the title.. Since there is no RMD for 2020 the only way to take it is to take nothing.
The surest way to know the future is when it becomes the past.
ubermax
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Re: Are you taking 2020 RMD anyhow?

Post by ubermax »

Not delaying , the draw is necessary for our budget .
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Electron
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Re: Are you taking 2020 RMD anyhow?

Post by Electron »

On the Roth Conversions, I was just reminded of the lower tax brackets and other changes following the 2018 tax reform. Many of those provisions are set to expire at the end of 2025. This looks like a very good time to consider any Roth conversions.

I had almost forgotten that my Social Security income and RMDs starting in 2018 would have triggered the AMT. The savings more than offset my loss of the state tax deduction. Overall the tax breaks were quite significant.
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carolinaman
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Re: Are you taking 2020 RMD anyhow?

Post by carolinaman »

I still do QCDs, but that is because of my commitment to charities and faith organizations. Otherwise, I am dong TIRA to Roth conversion. No RMDs this year.
minesweep
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Re: Are you taking 2020 RMD anyhow?

Post by minesweep »

I’m not taking my RMD for 2020. However, I inherited a portion of a TIRA and annuity this year, the total of which is very close to what my RMD would have been. I plan on clearing both of them off the books (so to speak) in 2020 instead.
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jdb
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Re: Are you taking 2020 RMD anyhow?

Post by jdb »

All my annual RMDs go to QCDs up to max $100K each year. I am continuing with the QCDs. The environmental organizations and immigrant legal support networks and shelters for abused women and children and organizations assisting families of slain police officers and organizations supporting sensible gun control which I support financially need help more than ever. The need does not stop and the QCDs remain tax free. Good luck.
Last edited by jdb on Mon Oct 19, 2020 3:45 pm, edited 3 times in total.
TJ89
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Re: Are you taking 2020 RMD anyhow?

Post by TJ89 »

MrJedi wrote: Wed Sep 23, 2020 1:51 pm If you don't need the money you can consider doing a Roth conversion.
That's what I did. I converted up to the top of the 22% bracket from conventional IRA to Roth.
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