Best broker for RMD management
Best broker for RMD management
I was reading a Morningstar article on RMDs this morning (https://www.morningstar.com/articles/10 ... too-much ) and began thinking about the how of RMD withdrawal. I still have a few years but want to begin planning.
What has been your experience using different brokers, e.g. Fidelity, Schwab, Vanguard, etc. on the overall satisfaction with making the necessary withdrawal(s) from tax deferred accounts, e.g. ease of setup/use, calculating and paying taxes, customer support, etc.
thanks
What has been your experience using different brokers, e.g. Fidelity, Schwab, Vanguard, etc. on the overall satisfaction with making the necessary withdrawal(s) from tax deferred accounts, e.g. ease of setup/use, calculating and paying taxes, customer support, etc.
thanks
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page
Re: Best broker for RMD management
My wife has an inherited RMD that distributes annually. Once we had it set up with Vanguard it has worked flawlessly.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
Re: Best broker for RMD management
You should add QCDs to your list.
We use Vanguard, it is very easy. You can easily adjust the amount of federal and state withholding. The RMD is adjusted for the QCD. Everything can be done on the website so there is no reason to call. We do our QCDs in January and then the residual RMD in one lump sum around March. Sometimes we use the cash flow from the RMD for a major purchase like a new car, other years it gets reinvested in a taxable account.
However, Vanguard is not prescient so if you have other IRAs and other income sources that impact your tax liability you need to make any adjustments needed for data that they do not know about. Their RMD tool is not tax forecasting software. If you have a more complex situation you'll still need to do some tax forecasting in your tax software (or ask your tax preparer) if you don't want to overpay and get a large refund back.
We use Vanguard, it is very easy. You can easily adjust the amount of federal and state withholding. The RMD is adjusted for the QCD. Everything can be done on the website so there is no reason to call. We do our QCDs in January and then the residual RMD in one lump sum around March. Sometimes we use the cash flow from the RMD for a major purchase like a new car, other years it gets reinvested in a taxable account.
However, Vanguard is not prescient so if you have other IRAs and other income sources that impact your tax liability you need to make any adjustments needed for data that they do not know about. Their RMD tool is not tax forecasting software. If you have a more complex situation you'll still need to do some tax forecasting in your tax software (or ask your tax preparer) if you don't want to overpay and get a large refund back.
- Doom&Gloom
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Re: Best broker for RMD management
My four year experience with using their automatic scheduled RMD services:
Vanguard: Easy to set up. Has never calculated mine with the correct table for spouse > 10 yr younger. TBF I have not contacted them to change it because the difference is not large enough for my trouble and the risk that they would screw it up worse.
Fidelity: Only one of these three that withholds state taxes which doesn't seem to be necessary. Navigating their RMD process on their website has been a real PITA for me.
Schwab: No issues after the initial set up which was a bit of a pain since I didn't have a bank account connected to my account.
Other than the issue I noted with Vanguard (which I probably could have easily had corrected), all have calculated my RMDs accurately and distributed them as expected and on schedule.
Vanguard: Easy to set up. Has never calculated mine with the correct table for spouse > 10 yr younger. TBF I have not contacted them to change it because the difference is not large enough for my trouble and the risk that they would screw it up worse.
Fidelity: Only one of these three that withholds state taxes which doesn't seem to be necessary. Navigating their RMD process on their website has been a real PITA for me.
Schwab: No issues after the initial set up which was a bit of a pain since I didn't have a bank account connected to my account.
Other than the issue I noted with Vanguard (which I probably could have easily had corrected), all have calculated my RMDs accurately and distributed them as expected and on schedule.
Re: Best broker for RMD management
We've had an inherited IRA at Vanguard and their free automatic RMD process is easy and reliable.
The use of the Schwab automatic RMD service requires that you participate in one of their account management programs, the one with the least direct expense is that one that keeps a portion of your portfolio in cash as Schwab's compensation (funds held in a Schwab bank account).
Fidelity has a free RMD service that seems pretty comparable to Vanguard's.
One thing with free RMD services is that they work best when the account assets are held in mutual funds. Often distributions must be taken from mutual funds, they generally won't "sell" shares, probably because the price is too open to being disputed. Issues could be the date selected for sale, the timing of the sale (market open, etc).
I'm sure some of the fintech firms with robos would handle ETFs but usually there's a robo management fee. And the fintech firms seem prone to selling out to someone else so they give little confidence that they'll be around for the (hopeful) RMD long haul.
The use of the Schwab automatic RMD service requires that you participate in one of their account management programs, the one with the least direct expense is that one that keeps a portion of your portfolio in cash as Schwab's compensation (funds held in a Schwab bank account).
Fidelity has a free RMD service that seems pretty comparable to Vanguard's.
One thing with free RMD services is that they work best when the account assets are held in mutual funds. Often distributions must be taken from mutual funds, they generally won't "sell" shares, probably because the price is too open to being disputed. Issues could be the date selected for sale, the timing of the sale (market open, etc).
I'm sure some of the fintech firms with robos would handle ETFs but usually there's a robo management fee. And the fintech firms seem prone to selling out to someone else so they give little confidence that they'll be around for the (hopeful) RMD long haul.
The closest helping hand is at the end of your own arm.
- Doom&Gloom
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Re: Best broker for RMD management
I'm not sure that is correct about Schwab unless I am misunderstanding something very basic.
I have ETFs in an IRA with a little less than $100 in money market funds at the moment. That is probably the most I've ever had in MM there except for when I need to sell some ETFs to have enough available in the MM fund for them to distribute my RMD from it. Is that considered an account management program?
I have ETFs in an IRA with a little less than $100 in money market funds at the moment. That is probably the most I've ever had in MM there except for when I need to sell some ETFs to have enough available in the MM fund for them to distribute my RMD from it. Is that considered an account management program?
Last edited by Doom&Gloom on Fri Jul 01, 2022 11:20 am, edited 1 time in total.
Re: Best broker for RMD management
Vanguard Inherited IRA since 2012 - automatic yearly RMD and never a problem.
Re: Best broker for RMD management
I should have been clearer I was referring to Schwab's automatic RMD service. When you enroll in an automatic RMD service you don't have to do anything, the RMD service calculates the RMD, liquidates the assets (does the sell orders), and distributes the RMD. Most brokers have an RMD service that will keep track of how much the RMD should be, the tricky part is having one that will actually liquidate assets. It's not hard to do the sells and the distributions for bogleheads. But if you have a surviving spouse who has never done anything financial the prospect of having to do RMDs could be uncomfortable for them, they could fall right into the hands of Satan (aka a financial advisor) who is ready to help them.Doom&Gloom wrote: ↑Fri Jul 01, 2022 10:51 am I'm not sure that is correct about Schwab unless I am misunderstanding something very basic...
The closest helping hand is at the end of your own arm.
- Doom&Gloom
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Re: Best broker for RMD management
Thanks. Fidelity and Vanguard automatically do everything re: RMDs for me, but I only have mutual funds there.123 wrote: ↑Fri Jul 01, 2022 11:51 amI should have been clearer I was referring to Schwab's automatic RMD service. When you enroll in an automatic RMD service you don't have to do anything, the RMD service calculates the RMD, liquidates the assets (does the sell orders), and distributes the RMD. Most brokers have an RMD service that will keep track of how much the RMD should be, the tricky part is having one that will actually liquidate assets. It's not hard to do the sells and the distributions for bogleheads. But if you have a surviving spouse who has never done anything financial the prospect of having to do RMDs could be uncomfortable for them, they could fall right into the hands of Satan (aka a financial advisor) who is ready to help them.Doom&Gloom wrote: ↑Fri Jul 01, 2022 10:51 am I'm not sure that is correct about Schwab unless I am misunderstanding something very basic...
At Schwab I have ETFs. They do everything automatically except fund the MM. Schwab calculates the amount, and I have to sell enough ETFs to have sufficient cash in the MM account by the designated date for my RMD. Once I do that, it's hands off for me. No hiccups yet, but I need to ensure that I do that by a certain date every year.
Re: Best broker for RMD management
My only RMD experience has been with Vanguard, and I am very satisfied with them. They accurately calculate the annual distribution. Very flexible and easy to define the dates and actions you want to occur as well as withholding or no withholding. I would not like the distribution to be totally automatic. I want to be in control of the funds on the IRA and Taxable ends, as I use the annual RMD for asset allocation purposes.
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Re: Best broker for RMD management
Had a difficult time with Fidelity getting the right amount taken our but after that it’s been perfect.
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Re: Best broker for RMD management
Vanguard stopped my auto RMDs when they changed my mutual fund account to a brokerage account. I missed their notification letter. Last I heard Vanguard was unable to process my Auto RMDs when i switched from mutual funds to ETFs. I just do my own RMDs now. Why does it not seem complicated for vanguard to sell my ETFs in order to make my auto RMD. I dunno.
Re: Best broker for RMD management
Selling is not required when taking RMDs, so that option (choice) can make it look slightly more complicated.Parkinglotracer wrote: ↑Fri Jul 01, 2022 7:39 pm Why does it not seem complicated for vanguard to sell my ETFs in order to make my auto RMD. I dunno.
Last edited by celia on Fri Jul 01, 2022 9:03 pm, edited 1 time in total.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
Re: Best broker for RMD management
For automatic RMDs:
Vanguard will only do automatic RMDs from Vanguard mutual funds.
Fidelity will do automatic RMDs from ANY mutual fund.
Schwab will onl do automatic RMDs from ETFs, and only if you sign up for their portfolio service (I forget the name, Intelligent Portfolios?).
Vanguard will only do automatic RMDs from Vanguard mutual funds.
Fidelity will do automatic RMDs from ANY mutual fund.
Schwab will onl do automatic RMDs from ETFs, and only if you sign up for their portfolio service (I forget the name, Intelligent Portfolios?).
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
Re: Best broker for RMD management
The broker is irrelevant if you just pull it out yourself (say, once a year) or do QCDs.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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Re: Best broker for RMD management
Good point - they could just transfer my shares (rmd) to my taxable brokerage account.celia wrote: ↑Fri Jul 01, 2022 8:52 pmSelling is not required when taking RMDs, so that option (choice) can make it look slightly more complicated.Parkinglotracer wrote: ↑Fri Jul 01, 2022 7:39 pm Why does it not seem complicated for vanguard to sell my ETFs in order to make my auto RMD. I dunno.
Re: Best broker for RMD management
We have an inherited IRA at Vanguard and it’s mildly annoying that VG won’t combine the total RMD and instead lists separate RMD amounts for the mutual funds and the brokerage. We have a MF bond fund that we take RMDs from and not from the brokerage, but it still shows an amount to remove from the brokerage. Not a big deal but not a clean look. May eventually transfer this to Fidelity to unify all our accounts.
Re: Best broker for RMD management
Custodians are required to calculate a separate RMD for each applicable account. The RMD for an Inherited IRA has a different divisor than for your own IRA. You also can’t combine the RMDs from different account types and just take it out of one. You can only combine them when the accounts have the same titling, such as a Traditional IRA at two custodians or two Inherited IRAs from the same deceased person. (These IRAs will have the same death date.)
An Inherited IRA and a Traditional IRA are different account types. And if you inherit IRAs from multiple people, you must take the RMD from each Inherited IRA.
Re: Best broker for RMD management
Are you saying your Inherited IRA consists of both a legacy platform mutual fund account and a modern platform brokerage account in the Inherited IRA? There's an easy way to fix that, which is move off the legacy platform and put your mutual funds into the modern platform brokerage account.orcycle wrote: ↑Sat Jul 02, 2022 2:59 pm We have an inherited IRA at Vanguard and it’s mildly annoying that VG won’t combine the total RMD and instead lists separate RMD amounts for the mutual funds and the brokerage. We have a MF bond fund that we take RMDs from and not from the brokerage, but it still shows an amount to remove from the brokerage. Not a big deal but not a clean look. May eventually transfer this to Fidelity to unify all our accounts.
But I may not be understanding the situation you are describing.
Re: Best broker for RMD management
I am reading it as orcycle’s own Traditional IRA is in a mutual fund only account and the Inherited IRA is in a brokerage account (or vice versa). That means they can’t be combined and each account has an RMD, which mildly annoys them. Of course, I might be misunderstanding this too.quietseas wrote: ↑Sat Jul 02, 2022 7:23 pmAre you saying your Inherited IRA consists of both a legacy platform mutual fund account and a modern platform brokerage account in the Inherited IRA? There's an easy way to fix that, which is move off the legacy platform and put your mutual funds into the modern platform brokerage account.orcycle wrote: ↑Sat Jul 02, 2022 2:59 pm We have an inherited IRA at Vanguard and it’s mildly annoying that VG won’t combine the total RMD and instead lists separate RMD amounts for the mutual funds and the brokerage. We have a MF bond fund that we take RMDs from and not from the brokerage, but it still shows an amount to remove from the brokerage. Not a big deal but not a clean look. May eventually transfer this to Fidelity to unify all our accounts.
But I may not be understanding the situation you are describing.
Another solution is to withdraw everything from the smaller account and no longer be subject to RMDs in that account.
Re: Best broker for RMD management
OP, Since you appear to be in your 60’s, have you thought ahead until you are in your mid 70s and what your future RMDs will do to your taxes?radiowave wrote: ↑Fri Jul 01, 2022 8:38 am I was reading a Morningstar article on RMDs this morning (https://www.morningstar.com/articles/10 ... too-much ) and began thinking about the how of RMD withdrawal. I still have a few years but want to begin planning.
You may be in your prime Roth conversion years now and have a chance to bring down future RMDs while letting future IRA growth happen in a Roth where it can grow tax-free instead.
If you are Single and have over $500K in tax-deferred accounts or Married with over a million in your joint tax-deferred accounts, I suggest reading
this thread and follow my links there.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
Re: Best broker for RMD management
For me, the brokerage doesn't matter. I don't like auto transactions for anything I do, particularly RMDs. Too many decisions to make based on your circumstances. Are all your IRAs at that brokerage, how much in QCDs, withdrawal in-kind or cash, withholding taxes, etc. How will you rebalance with your withdrawals? Can't imagine leaving it up to Vanguard to get it right.
I just don't get the infatuation Vanguard clients have with their automatic capabilities. We hear about auto-investing, dividend reinvestment, auto-RMDs, etc. Educate yourself through this forum and take control of your financial decisions.
I just don't get the infatuation Vanguard clients have with their automatic capabilities. We hear about auto-investing, dividend reinvestment, auto-RMDs, etc. Educate yourself through this forum and take control of your financial decisions.
Re: Best broker for RMD management
I agree. I make QCD donations during the year, as I see fit. Near the end of the year, I calculate how much I want withheld to meet a safe harbor. I take the balance of the RMD and have the taxes withheld. Vanguard shows how much more I need to take. I don't need them to do anything else. There really isn't much "management" to be done.BabaWawa wrote: ↑Sun Jul 03, 2022 4:15 pm For me, the brokerage doesn't matter. I don't like auto transactions for anything I do, particularly RMDs. Too many decisions to make based on your circumstances. Are all your IRAs at that brokerage, how much in QCDs, withdrawal in-kind or cash, withholding taxes, etc. How will you rebalance with your withdrawals? Can't imagine leaving it up to Vanguard to get it right.
Re: Best broker for RMD management
Thanks Celia, yes I am aware or Roth conversions and tax implications and yes, just transitioned into retirement this past year. My primary question was focused on which broker handled the RMD distribution best and thanks everyone for the feedback!celia wrote: ↑Sat Jul 02, 2022 10:49 pmOP, Since you appear to be in your 60’s, have you thought ahead until you are in your mid 70s and what your future RMDs will do to your taxes?radiowave wrote: ↑Fri Jul 01, 2022 8:38 am I was reading a Morningstar article on RMDs this morning (https://www.morningstar.com/articles/10 ... too-much ) and began thinking about the how of RMD withdrawal. I still have a few years but want to begin planning.
You may be in your prime Roth conversion years now and have a chance to bring down future RMDs while letting future IRA growth happen in a Roth where it can grow tax-free instead.
If you are Single and have over $500K in tax-deferred accounts or Married with over a million in your joint tax-deferred accounts, I suggest reading
this thread and follow my links there.
I am vacillating on combining IRA funds - currently across 3 brokers - into a single broker for simplicity. I am concerned with the comments about Schwab. Has anyone had any issues with IRA funds at 2 different brokers and get correct amount distributed? Any issues with tax withholding at any of the brokers? thanks
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page
Re: Best broker for RMD management
I'm referring only to one inherited IRA, which must be the legacy platform/modern brokerage split you describe, @quietseas. I'll inquire into moving the MFs to the brokerage. Thanks.celia wrote: ↑Sat Jul 02, 2022 10:18 pmI am reading it as orcycle’s own Traditional IRA is in a mutual fund only account and the Inherited IRA is in a brokerage account (or vice versa). That means they can’t be combined and each account has an RMD, which mildly annoys them. Of course, I might be misunderstanding this too.quietseas wrote: ↑Sat Jul 02, 2022 7:23 pmAre you saying your Inherited IRA consists of both a legacy platform mutual fund account and a modern platform brokerage account in the Inherited IRA? There's an easy way to fix that, which is move off the legacy platform and put your mutual funds into the modern platform brokerage account.orcycle wrote: ↑Sat Jul 02, 2022 2:59 pm We have an inherited IRA at Vanguard and it’s mildly annoying that VG won’t combine the total RMD and instead lists separate RMD amounts for the mutual funds and the brokerage. We have a MF bond fund that we take RMDs from and not from the brokerage, but it still shows an amount to remove from the brokerage. Not a big deal but not a clean look. May eventually transfer this to Fidelity to unify all our accounts.
But I may not be understanding the situation you are describing.
Another solution is to withdraw everything from the smaller account and no longer be subject to RMDs in that account.