RMD worksheet

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capran
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RMD worksheet

Post by capran »

Is it just me not understanding the worksheet and RMD calculation, or has the IRS not updated the form here: https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf

It still seems to have one calculate the RMD at 70 1/2 in the instructions.

I am hoping I can empty my IRA by the December 31st of the year prior to me turning 71 1/2, but then the form seems to suggest compute using the balance at 70 1/2???

current age at end of December 2021 @69 1/2 balance after this years (December 2021) 100k Roth Conversion @183,000
December 2022 age @ 70 1/2 balance after December 2022 Roth conversion of @100,000= 83,000 balance
December 2023 age @ 71 1/2 Do Roth conversion December 2023 of Balance @ 83,000, leaving balance of 0 on December 31,2023

Please correct my errors in thinking this through.

Thanks
Last edited by capran on Thu Oct 14, 2021 2:04 pm, edited 1 time in total.
JoinToday
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Re: RMD worksheet

Post by JoinToday »

"...Due to changes made by the SECURE Act, if your 70th birthday is July 1, 2019 or later, you do not have to take withdrawals until you reach age 72. "
https://www.irs.gov/retirement-plans/pl ... tions-rmds

I think the form you are looking at has not been updated. I believe you are required to take an RMD in the year you turn 72, based on the IRA value on December 31 of the prior year. If you turn 72 in 2024, and your IRA was fully converted by Dec 31, 2023, you do not need to take an RMD.

I think the date underlined and in bold should be 2023:
capran wrote: Thu Oct 14, 2021 12:11 pm ....
current age at end of December 2021 @69 1/2 balance after this years (December 2021) 100k Roth Conversion @183,000
December 2022 age @ 70 1/2 balance after December 2022 Roth conversion of @100,000= 83,000 balance
December 2023 age @ 71 1/2 Do Roth conversion December 2022 of Balance @ 83,000, leaving balance of 0 on December 31,2023
I wish I had learned about index funds 25 years ago
Topic Author
capran
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Re: RMD worksheet

Post by capran »

JoinToday wrote: Thu Oct 14, 2021 12:41 pm "...Due to changes made by the SECURE Act, if your 70th birthday is July 1, 2019 or later, you do not have to take withdrawals until you reach age 72. "
https://www.irs.gov/retirement-plans/pl ... tions-rmds

I think the form you are looking at has not been updated. I believe you are required to take an RMD in the year you turn 72, based on the IRA value on December 31 of the prior year. If you turn 72 in 2024, and your IRA was fully converted by Dec 31, 2023, you do not need to take an RMD.

I think the date underlined and in bold should be 2023:
capran wrote: Thu Oct 14, 2021 12:11 pm ....
current age at end of December 2021 @69 1/2 balance after this years (December 2021) 100k Roth Conversion @183,000
December 2022 age @ 70 1/2 balance after December 2022 Roth conversion of @100,000= 83,000 balance
December 2023 age @ 71 1/2 Do Roth conversion December 2022 of Balance @ 83,000, leaving balance of 0 on December 31,2023
Yes, that was a typo on the 2023. and yes, I was aware of the Secure act age 72 change, but the current IRS website still had the old form, so thought I would double check. And I wonder if when they update the form, if the table will shift to the 72 rather than the 70 1/2. and still trying to fully understand when the first and second RMD will need to be taken (anticipating spouse will have an RMD when she turns 72 3 years after me).
delamer
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Re: RMD worksheet

Post by delamer »

Per the IRS:

If you reached the age of 70½ in 2019 the prior rule applies, and you must take your first RMD by April 1, 2020. If you reach age 70 ½ in 2020 or later you must take your first RMD by April 1 of the year after you reach 72.

From: https://www.irs.gov/retirement-plans/re ... tributions

So if you don’t still have a balance as of December 31, 2023, then you won’t need to take a RMD.

Of course, if your IRA has growth or losses over the next couple years, then your withdrawal plans will need to change to get empty it by then.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Alan S.
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Re: RMD worksheet

Post by Alan S. »

Since you were obviously born after 6/30/1949, your first RMD distribution year is the year you reach 72. You can forget about all 1/2 year ages as they will no longer apply to you. Your first RMD for the year you reach 72 can be deferred in whole or in part to 4/1 of the following year (your RBD) if you wish. That rule did not change. Generally, you would want to avoid having 2 RMDs taxable in the year you reach 73, but there are exceptions.
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capran
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Re: RMD worksheet

Post by capran »

Alan S. wrote: Thu Oct 14, 2021 3:52 pm Since you were obviously born after 6/30/1949, your first RMD distribution year is the year you reach 72. You can forget about all 1/2 year ages as they will no longer apply to you. Your first RMD for the year you reach 72 can be deferred in whole or in part to 4/1 of the following year (your RBD) if you wish. That rule did not change. Generally, you would want to avoid having 2 RMDs taxable in the year you reach 73, but there are exceptions.
Alan S., Since I am fairly certain I will have no RMD due since the account will be empty, I look at spouses which will not be empty. Lets say she turns 72 in early January 2027, you are saying she could actually defer her first RMS to April 1 2028 because that is the following year (RBD), however, you would have two RMD's due that year (April 1 and December 31). So for arguments sake, to avoid 2 RMD's in one year, she could go ahead and take her first RMD before 12/31/2027, which is the same calendar year she turned 72? And then take her next RMD in 2028, and every subsequent year? Are the RMDs due by April 1 every year or December 31? And lastly, do you know if Vanguard allows you to have taxes withheld from an RMD (we have taxes withheld from pensions and SS so we don't have to pay quarterly). Thank you for sharing your expertise.
secondcor521
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Re: RMD worksheet

Post by secondcor521 »

capran wrote: Thu Oct 14, 2021 5:18 pm
Alan S. wrote: Thu Oct 14, 2021 3:52 pm Since you were obviously born after 6/30/1949, your first RMD distribution year is the year you reach 72. You can forget about all 1/2 year ages as they will no longer apply to you. Your first RMD for the year you reach 72 can be deferred in whole or in part to 4/1 of the following year (your RBD) if you wish. That rule did not change. Generally, you would want to avoid having 2 RMDs taxable in the year you reach 73, but there are exceptions.
Alan S., Since I am fairly certain I will have no RMD due since the account will be empty, I look at spouses which will not be empty. Lets say she turns 72 in early January 2027, you are saying she could actually defer her first RMS to April 1 2028 because that is the following year (RBD), however, you would have two RMD's due that year (April 1 and December 31). So for arguments sake, to avoid 2 RMD's in one year, she could go ahead and take her first RMD before 12/31/2027, which is the same calendar year she turned 72? And then take her next RMD in 2028, and every subsequent year? Are the RMDs due by April 1 every year or December 31? And lastly, do you know if Vanguard allows you to have taxes withheld from an RMD (we have taxes withheld from pensions and SS so we don't have to pay quarterly). Thank you for sharing your expertise.
I'm not Alan S. (not by a long shot :D ), but I know the answers.

Yes, your wife can delay her first RMD if she wants, and yes, that would mean 2 RMDs for her in 2028 (first by 4/1/2028 based on 12/31/2026 account value, second by 12/31/2028 based on 12/31/2027 account value).

Yes, she should probably take her first RMD by 12/31/2027, thus having that RMD be taxed in 2027, rather than in 2028. It spreads out the income, which probably lessens the overall taxes due.

RMDs are normally due by 12/31 of the year in question. It's only the first one that can be taken up until 4/1 of the subsequent year. I think this first year 4/1 exception is to allow for people who might be a tad disorganized and don't realize they need to take an RMD.

Vanguard allows you to have federal taxes withheld from RMDs. You get to set the percentage - for example you can have 23% of your RMDs withheld for federal taxes. You can also use their RMD service, which will automatically calculate your RMD amount and do the withdrawals for you on a monthly (and possibly quarterly) basis, sending the proceeds to a Vanguard brokerage account (or possibly an external bank account).

My Dad has his RMD set up with their RMD service, and they do everything automatically on the 15th of every month. They recalculate it every year as he gets older, too. I assume they will also update properly and use the new RMD divisors when they come into effect (2023 I think).
Topic Author
capran
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Re: RMD worksheet

Post by capran »

secondcor521 wrote: Thu Oct 14, 2021 6:18 pm
capran wrote: Thu Oct 14, 2021 5:18 pm
Alan S. wrote: Thu Oct 14, 2021 3:52 pm Since you were obviously born after 6/30/1949, your first RMD distribution year is the year you reach 72. You can forget about all 1/2 year ages as they will no longer apply to you. Your first RMD for the year you reach 72 can be deferred in whole or in part to 4/1 of the following year (your RBD) if you wish. That rule did not change. Generally, you would want to avoid having 2 RMDs taxable in the year you reach 73, but there are exceptions.
Alan S., Since I am fairly certain I will have no RMD due since the account will be empty, I look at spouses which will not be empty. Lets say she turns 72 in early January 2027, you are saying she could actually defer her first RMS to April 1 2028 because that is the following year (RBD), however, you would have two RMD's due that year (April 1 and December 31). So for arguments sake, to avoid 2 RMD's in one year, she could go ahead and take her first RMD before 12/31/2027, which is the same calendar year she turned 72? And then take her next RMD in 2028, and every subsequent year? Are the RMDs due by April 1 every year or December 31? And lastly, do you know if Vanguard allows you to have taxes withheld from an RMD (we have taxes withheld from pensions and SS so we don't have to pay quarterly). Thank you for sharing your expertise.
I'm not Alan S. (not by a long shot :D ), but I know the answers.

Yes, your wife can delay her first RMD if she wants, and yes, that would mean 2 RMDs for her in 2028 (first by 4/1/2028 based on 12/31/2026 account value, second by 12/31/2028 based on 12/31/2027 account value).

Yes, she should probably take her first RMD by 12/31/2027, thus having that RMD be taxed in 2027, rather than in 2028. It spreads out the income, which probably lessens the overall taxes due.

RMDs are normally due by 12/31 of the year in question. It's only the first one that can be taken up until 4/1 of the subsequent year. I think this first year 4/1 exception is to allow for people who might be a tad disorganized and don't realize they need to take an RMD.

Vanguard allows you to have federal taxes withheld from RMDs. You get to set the percentage - for example you can have 23% of your RMDs withheld for federal taxes. You can also use their RMD service, which will automatically calculate your RMD amount and do the withdrawals for you on a monthly (and possibly quarterly) basis, sending the proceeds to a Vanguard brokerage account (or possibly an external bank account).

My Dad has his RMD set up with their RMD service, and they do everything automatically on the 15th of every month. They recalculate it every year as he gets older, too. I assume they will also update properly and use the new RMD divisors when they come into effect (2023 I think).
Thank you Secondcor521. It really helps to approach it from repeated exposure, as I am so concrete in my thinking. I think I finally have it. Bottom line is mine should be empty but when wife hits 72 in January 2027 she should take her first RMD before the end of 2027. It will be based on the balance on 12/31/26. (and hopefully the IRS will update their form by then so she knows if the devisor she should use will be on the line with age 72). and the next year, after her January 2028 73rd birthday, and before the end of 12/31/2028, she will take her second RMD based on her 12/31/27 account value. And she'll continue to take subsequent RMD's toward the end of ever subsequent year. If I have that wrong, please crrect me. If I'm getting it, I am good to go. Thank you.
delamer
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Re: RMD worksheet

Post by delamer »

capran wrote: Thu Oct 14, 2021 7:39 pm
secondcor521 wrote: Thu Oct 14, 2021 6:18 pm
capran wrote: Thu Oct 14, 2021 5:18 pm
Alan S. wrote: Thu Oct 14, 2021 3:52 pm Since you were obviously born after 6/30/1949, your first RMD distribution year is the year you reach 72. You can forget about all 1/2 year ages as they will no longer apply to you. Your first RMD for the year you reach 72 can be deferred in whole or in part to 4/1 of the following year (your RBD) if you wish. That rule did not change. Generally, you would want to avoid having 2 RMDs taxable in the year you reach 73, but there are exceptions.
Alan S., Since I am fairly certain I will have no RMD due since the account will be empty, I look at spouses which will not be empty. Lets say she turns 72 in early January 2027, you are saying she could actually defer her first RMS to April 1 2028 because that is the following year (RBD), however, you would have two RMD's due that year (April 1 and December 31). So for arguments sake, to avoid 2 RMD's in one year, she could go ahead and take her first RMD before 12/31/2027, which is the same calendar year she turned 72? And then take her next RMD in 2028, and every subsequent year? Are the RMDs due by April 1 every year or December 31? And lastly, do you know if Vanguard allows you to have taxes withheld from an RMD (we have taxes withheld from pensions and SS so we don't have to pay quarterly). Thank you for sharing your expertise.
I'm not Alan S. (not by a long shot :D ), but I know the answers.

Yes, your wife can delay her first RMD if she wants, and yes, that would mean 2 RMDs for her in 2028 (first by 4/1/2028 based on 12/31/2026 account value, second by 12/31/2028 based on 12/31/2027 account value).

Yes, she should probably take her first RMD by 12/31/2027, thus having that RMD be taxed in 2027, rather than in 2028. It spreads out the income, which probably lessens the overall taxes due.

RMDs are normally due by 12/31 of the year in question. It's only the first one that can be taken up until 4/1 of the subsequent year. I think this first year 4/1 exception is to allow for people who might be a tad disorganized and don't realize they need to take an RMD.

Vanguard allows you to have federal taxes withheld from RMDs. You get to set the percentage - for example you can have 23% of your RMDs withheld for federal taxes. You can also use their RMD service, which will automatically calculate your RMD amount and do the withdrawals for you on a monthly (and possibly quarterly) basis, sending the proceeds to a Vanguard brokerage account (or possibly an external bank account).

My Dad has his RMD set up with their RMD service, and they do everything automatically on the 15th of every month. They recalculate it every year as he gets older, too. I assume they will also update properly and use the new RMD divisors when they come into effect (2023 I think).
Thank you Secondcor521. It really helps to approach it from repeated exposure, as I am so concrete in my thinking. I think I finally have it. Bottom line is mine should be empty but when wife hits 72 in January 2027 she should take her first RMD before the end of 2027. It will be based on the balance on 12/31/26. (and hopefully the IRS will update their form by then so she knows if the devisor she should use will be on the line with age 72). and the next year, after her January 2028 73rd birthday, and before the end of 12/31/2028, she will take her second RMD based on her 12/31/27 account value. And she'll continue to take subsequent RMD's toward the end of ever subsequent year. If I have that wrong, please crrect me. If I'm getting it, I am good to go. Thank you.
Just a note that, yes, there obviously are important tax considerations surrounding RMDs taken for a married couple in the same year. But there is no connection by the IRS. The fact that you will have done Roth conversions for your IRA has no effect on your wife’s RMDs.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
secondcor521
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Re: RMD worksheet

Post by secondcor521 »

capran wrote: Thu Oct 14, 2021 7:39 pm Thank you Secondcor521. It really helps to approach it from repeated exposure, as I am so concrete in my thinking. I think I finally have it. Bottom line is mine should be empty but when wife hits 72 in January 2027 she should take her first RMD before the end of 2027. It will be based on the balance on 12/31/26. (and hopefully the IRS will update their form by then so she knows if the devisor she should use will be on the line with age 72). and the next year, after her January 2028 73rd birthday, and before the end of 12/31/2028, she will take her second RMD based on her 12/31/27 account value. And she'll continue to take subsequent RMD's toward the end of ever subsequent year. If I have that wrong, please correct me. If I'm getting it, I am good to go. Thank you.
[Emphasis added]

Excepting the special 4/1 rule for the first RMD, she can take her RMDs any time during the calendar year. No need to wait for a birthday - she could take her 2028 RMD on 1/1/2028 if she wanted to.

There are advantages to taking the RMD early in the year, and other advantages to taking it late in the year, and even some advantages in spreading it throughout the year. It kind of depends on your goals and preferences.

Vanguard would probably be happy to share their math with you so you can double check the divisor.

But yeah, other than those minor points, you have it right.
Topic Author
capran
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Re: RMD worksheet

Post by capran »

secondcor521 wrote: Thu Oct 14, 2021 9:49 pm
capran wrote: Thu Oct 14, 2021 7:39 pm Thank you Secondcor521. It really helps to approach it from repeated exposure, as I am so concrete in my thinking. I think I finally have it. Bottom line is mine should be empty but when wife hits 72 in January 2027 she should take her first RMD before the end of 2027. It will be based on the balance on 12/31/26. (and hopefully the IRS will update their form by then so she knows if the devisor she should use will be on the line with age 72). and the next year, after her January 2028 73rd birthday, and before the end of 12/31/2028, she will take her second RMD based on her 12/31/27 account value. And she'll continue to take subsequent RMD's toward the end of ever subsequent year. If I have that wrong, please correct me. If I'm getting it, I am good to go. Thank you.
[Emphasis added]

Excepting the special 4/1 rule for the first RMD, she can take her RMDs any time during the calendar year. No need to wait for a birthday - she could take her 2028 RMD on 1/1/2028 if she wanted to.

There are advantages to taking the RMD early in the year, and other advantages to taking it late in the year, and even some advantages in spreading it throughout the year. It kind of depends on your goals and preferences.

Vanguard would probably be happy to share their math with you so you can double check the divisor.

But yeah, other than those minor points, you have it right.
Thanks again. Yes, we typically wait until very close to the end of the year before doing our Roth conversion so we have a very good handle on what our income was for the year, as well as being reasonable sure we don't have any surprise capital gains (usually from involuntary bond redemptions/calls), and figure we might do the same with any RMD's, although maybe since those are substantially less than the tIRA to Roth conversion, maybe doing that portion early in the year makes more sense. Nice to have flexibility. And nice to know that Vanguard can compute and share their numbers. The form/worksheet doesn't seem all that complicated as long as the IRS updates it to the new table which should begin at 72 rather than 70. Primary goal is to simplify and be done, as we do try to travel quite a bit as long as we're able, especially when we're out on a boat for two months with no secure wifi and no mail.
Topic Author
capran
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Re: RMD worksheet

Post by capran »

delamer wrote: Thu Oct 14, 2021 9:00 pm
capran wrote: Thu Oct 14, 2021 7:39 pm
secondcor521 wrote: Thu Oct 14, 2021 6:18 pm
capran wrote: Thu Oct 14, 2021 5:18 pm
Alan S. wrote: Thu Oct 14, 2021 3:52 pm Since you were obviously born after 6/30/1949, your first RMD distribution year is the year you reach 72. You can forget about all 1/2 year ages as they will no longer apply to you. Your first RMD for the year you reach 72 can be deferred in whole or in part to 4/1 of the following year (your RBD) if you wish. That rule did not change. Generally, you would want to avoid having 2 RMDs taxable in the year you reach 73, but there are exceptions.
Alan S., Since I am fairly certain I will have no RMD due since the account will be empty, I look at spouses which will not be empty. Lets say she turns 72 in early January 2027, you are saying she could actually defer her first RMS to April 1 2028 because that is the following year (RBD), however, you would have two RMD's due that year (April 1 and December 31). So for arguments sake, to avoid 2 RMD's in one year, she could go ahead and take her first RMD before 12/31/2027, which is the same calendar year she turned 72? And then take her next RMD in 2028, and every subsequent year? Are the RMDs due by April 1 every year or December 31? And lastly, do you know if Vanguard allows you to have taxes withheld from an RMD (we have taxes withheld from pensions and SS so we don't have to pay quarterly). Thank you for sharing your expertise.
I'm not Alan S. (not by a long shot :D ), but I know the answers.

Yes, your wife can delay her first RMD if she wants, and yes, that would mean 2 RMDs for her in 2028 (first by 4/1/2028 based on 12/31/2026 account value, second by 12/31/2028 based on 12/31/2027 account value).

Yes, she should probably take her first RMD by 12/31/2027, thus having that RMD be taxed in 2027, rather than in 2028. It spreads out the income, which probably lessens the overall taxes due.

RMDs are normally due by 12/31 of the year in question. It's only the first one that can be taken up until 4/1 of the subsequent year. I think this first year 4/1 exception is to allow for people who might be a tad disorganized and don't realize they need to take an RMD.

Vanguard allows you to have federal taxes withheld from RMDs. You get to set the percentage - for example you can have 23% of your RMDs withheld for federal taxes. You can also use their RMD service, which will automatically calculate your RMD amount and do the withdrawals for you on a monthly (and possibly quarterly) basis, sending the proceeds to a Vanguard brokerage account (or possibly an external bank account).

My Dad has his RMD set up with their RMD service, and they do everything automatically on the 15th of every month. They recalculate it every year as he gets older, too. I assume they will also update properly and use the new RMD divisors when they come into effect (2023 I think).
Thank you Secondcor521. It really helps to approach it from repeated exposure, as I am so concrete in my thinking. I think I finally have it. Bottom line is mine should be empty but when wife hits 72 in January 2027 she should take her first RMD before the end of 2027. It will be based on the balance on 12/31/26. (and hopefully the IRS will update their form by then so she knows if the devisor she should use will be on the line with age 72). and the next year, after her January 2028 73rd birthday, and before the end of 12/31/2028, she will take her second RMD based on her 12/31/27 account value. And she'll continue to take subsequent RMD's toward the end of ever subsequent year. If I have that wrong, please crrect me. If I'm getting it, I am good to go. Thank you.
Just a note that, yes, there obviously are important tax considerations surrounding RMDs taken for a married couple in the same year. But there is no connection by the IRS. The fact that you will have done Roth conversions for your IRA has no effect on your wife’s RMDs.
Yes, the only connection is looking at after the RMD is added to income so that we know how much of the IRA we can convert to Roth, especially since one can't convert RMD's to Roth. We might even consider upping the taxes withheld from the RMD to reduce the taxes we pay on other sources of income.
sport
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Re: RMD worksheet

Post by sport »

If you make charitable donations consider making Qualified Charitable Distributions (QCDs). These can be part of your RMD and they escape federal tax altogether and possibly state income tax as well. If you empty your TRIA, you have to pay tax on the whole amount. QCDs are a way to escape the tax on the amount of the donations. You can make QCDs every year if you are older than 71.5. The annual limit is 100K.
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Eagle33
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Re: RMD worksheet

Post by Eagle33 »

sport wrote: Fri Oct 15, 2021 4:08 pm If you make charitable donations consider making Qualified Charitable Distributions (QCDs). These can be part of your RMD and they escape federal tax altogether and possibly state income tax as well. If you empty your TRIA, you have to pay tax on the whole amount. QCDs are a way to escape the tax on the amount of the donations. You can make QCDs every year if you are older than 71.5. The annual limit is 100K.
Should read "You can make QCDs every year if you are older than 70.5."
sport
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Re: RMD worksheet

Post by sport »

Eagle33 wrote: Fri Oct 15, 2021 8:23 pm
sport wrote: Fri Oct 15, 2021 4:08 pm If you make charitable donations consider making Qualified Charitable Distributions (QCDs). These can be part of your RMD and they escape federal tax altogether and possibly state income tax as well. If you empty your TRIA, you have to pay tax on the whole amount. QCDs are a way to escape the tax on the amount of the donations. You can make QCDs every year if you are older than 71.5. The annual limit is 100K.
Should read "You can make QCDs every year if you are older than 70.5."
Yes! Thanks for the correction.
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capran
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Re: RMD worksheet

Post by capran »

sport wrote: Fri Oct 15, 2021 4:08 pm If you make charitable donations consider making Qualified Charitable Distributions (QCDs). These can be part of your RMD and they escape federal tax altogether and possibly state income tax as well. If you empty your TRIA, you have to pay tax on the whole amount. QCDs are a way to escape the tax on the amount of the donations. You can make QCDs every year if you are older than 71.5. The annual limit is 100K.
I will make a note of that. Seems like if one was close, or slightly over the IRMAA surcharge level, doing a QCD for the amount you were over might be a good alternative. Add that to the list of "learn about how that's done".
trueblueky
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Re: RMD worksheet

Post by trueblueky »

The rule about the first withdrawal is not either/or. You could take part of your 1st RMD during the year you turn 72, and the remainder of it by April 1 of the following year.

You might want to do that for any number of tax reasons, e.g., avoid IRMAA one year.

Note that delaying any part of the first RMD until the second year makes the second RMD larger.
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