A hopefully simple question about RMD

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gavinsiu
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A hopefully simple question about RMD

Post by gavinsiu »

To calculate RMD, you take the fund value from last year at 12/31, then you use the IRS table and look up your age for life expectancy, then do a value divided by life expectancy.

What date is the age calculated? So if the RMD is for 2022, I would use my age at 12/31/22? Does it matter if the birthday is earlier or later in the year for example?

In a nut shell, If I want to calculate RMD for 2022, I would use the value of the IRA on 12/31/2021, and the life expectancy age at 12/31/2022?
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22twain
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Re: A hopefully simple question about RMD

Post by 22twain »

Your RMD for 2022 is calculated using your (integer) age on your birthday in 2022, and your account balance on 12/31/2021. It doesn't matter whether your birthday comes early or late in the year, or somewhere in the middle. The RMD amount can be distributed any time during 2022, distributed among as many chunks as you like, so long as it's completed before 1/1/2023. Exception: if it's your first RMD, that is, you turn 72 during 2022, you can complete it before 4/1/2023.

Your phrasing "age on 12/31/2022" also works, provided you interpret "age" as "integer part of your age" (discarding the fractional part).
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tibbitts
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Re: A hopefully simple question about RMD

Post by tibbitts »

I'm not at RMD age yet, but I thought each financial institution would provide you with the correct value, so you wouldn't have to calculate it...? I'm not sure exactly when during a year they'd provide it, though.
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gavinsiu
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Re: A hopefully simple question about RMD

Post by gavinsiu »

tibbitts wrote: Tue Aug 09, 2022 12:24 am I'm not at RMD age yet, but I thought each financial institution would provide you with the correct value, so you wouldn't have to calculate it...? I'm not sure exactly when during a year they'd provide it, though.
That is the problem, I do not trust their number. Frankly, we should double-check any way. I am pretty sure mistakes often occur. Also RMD is usually beyond the first tier helpdesk, so if I call I have to wait online to get routed to a person who actually know what they are doing.

So the number they provide is smaller than expected.
niagara_guy
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Re: A hopefully simple question about RMD

Post by niagara_guy »

Here is the IRS webpage for RMDs. There is a link in this link for the life expectancy tables:

https://www.irs.gov/retirement-plans/pl ... tions-rmds
jebmke
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Re: A hopefully simple question about RMD

Post by jebmke »

tibbitts wrote: Tue Aug 09, 2022 12:24 am I'm not at RMD age yet, but I thought each financial institution would provide you with the correct value, so you wouldn't have to calculate it...? I'm not sure exactly when during a year they'd provide it, though.
They will but if you want to take it all out of one account then you have to do some simple arithmetic anyway. The RMD is a very simple calculation: one number divided by another.

Alternatively, one could consolidate all IRAs into one account and have the custodian put it on automatic (calculate and distribute). There is some merit to that.
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tibbitts
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Re: A hopefully simple question about RMD

Post by tibbitts »

jebmke wrote: Tue Aug 09, 2022 8:16 am
tibbitts wrote: Tue Aug 09, 2022 12:24 am I'm not at RMD age yet, but I thought each financial institution would provide you with the correct value, so you wouldn't have to calculate it...? I'm not sure exactly when during a year they'd provide it, though.
They will but if you want to take it all out of one account then you have to do some simple arithmetic anyway. The RMD is a very simple calculation: one number divided by another.

Alternatively, one could consolidate all IRAs into one account and have the custodian put it on automatic (calculate and distribute). There is some merit to that.
And of course you can't combine different account types that require RMDs, so you can only add together all the IRAs with each other, the 403bs with other 403bs, etc. But the math to add up several IRAs is definitely simpler than calculating the RMD from scratch. I'm guessing you have to calculate each type separately (if you have multiple accounts of one type), then add, vs. adding first?

Is the number calculated by the provider reported to the IRS or only to the account holder?
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BolderBoy
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Re: A hopefully simple question about RMD

Post by BolderBoy »

tibbitts wrote: Tue Aug 09, 2022 12:24 amI'm not at RMD age yet, but I thought each financial institution would provide you with the correct value, so you wouldn't have to calculate it...? I'm not sure exactly when during a year they'd provide it, though.
VG does the calculation for you and will send you their "letter" with the calculation info in it. They send the "letter" in January of each year you need to take the RMD. The letter also includes info offering their optional RMD service if you want them to do that, too.
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