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Being prudent, I've been taking my Required Minimum Distribution (RMD) in the first week of January for the last 5 years to minimize the price difference of any securities that are sold from their 31 December value. This approach worked great as I didn't need the RMD for living expenses or to pay income taxes on the RMD. Social Security and two small pensions (< $1,000/mo.) provided more than enough for living expenses and income taxes.

Unfortunately, while the analysis of the Coronavirus Relief Bill indicates that one can waive one's 2020 RMD withdrawal; it doesn't appear to provide an extension to the 60-day window to undo an RMD withdrawal. Being prudent this year sucks! Bigly!
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"Unfortunately, while the analysis of the Coronavirus Relief Bill indicates that one can waive one's 2020 RMD withdrawal; it doesn't appear to provide an extension to the 60-day window to undo an RMD withdrawal. Being prudent this year sucks! Bigly! "

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Risk is like that - sometimes you just cannot see what can go wrong until you
step in the hole.
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The bill also waives the required minimum distribution (RMD) rules for 2020.

That's super good news. I had already suggested my wife stop her monthly RMD and wait until the end of the year when hopefully the market has recovered. I need to call and stop my monthly RMD although plans may soon be in the works to stop them. Will have to check.

We don't need the RMDs to live on so that's cool they realized making these periodic withdrawals while the market is down could really hurt.

Regards,

ImAGolfer (retired '03)
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Ok, does suspending RMD rules matter if one does not currently need the money and always puts it back into an investment fund rather than spend it?

Assuming that the retirement fund and the unqualified investment funds are similar and have similar returns and risk. I can only think of two differences. Depending on total income, taxes may have to be paid on the RMD when it is taken. And once the money is in the unqualified investment account you have to pay taxes on dividends and any capital gains in the fund if there has been some churning of investments within it.

But since you have to pay all that when the funds are eventually taken out of the retirement account, does it make any difference in 20 years whether or not you took this year off of taking the RMD?

Sometimes I get a bit lost in the nuances behind financial decision making. I'm obviously trying to figure out if it is worthwhile to change what we have been doing in terms of RMD distribution.

Thanks
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But since you have to pay all that when the funds are eventually taken out of the retirement account, does it make any difference in 20 years whether or not you took this year off of taking the RMD?

It can and does for me. My wife died in January 2019 making 2019 the last year in which I can file as married filing jointly. For the 2020 tax year, I will file as a single tax payer. My 2020 RMD is $114K resulting in 85% of my Social Security benefit being taxed in addition to two small pensions and the interest and dividends earned in taxable accounts. As a result, my estimated taxable income in 2020 will be approximately $162K. This would place me in the Federal 24% marginal tax bracket and, possibly, the 32% bracket.

If I can waive my 2020 RMD, my Social Security benefit will not be taxable and my estimated taxable income for 2020 will drop to around $16K. This would place me in the 12% marginal tax bracket.

Two other factors that come into play. First, your tax-deferred accounts are unlikely to return to their 19 February 2020 valuations by the end of the year and, definitely won't if you take your 2020 RMD. Second, the life expectancy factors in the Uniform Lifetime Table will be increased in 2021 decreasing the RMD that you will need to withdraw in the future.

I think it will make a difference if you are able to waive your 2020 RMD. If a law is passed this year that allowed me to undo my 2020 RMD withdrawal, I would deposit $114K in my IRA in heartbeat.
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I usually keep at least six months of RMD in a money market cash fund at the IRA company.

Did that early January to continue the funding for 2020. With the normal dividend and income streams from investments, that should easily get me to the end of the year. SP500 pays 2%. REITS pay....GNMA pay....Corp bonds pay.....etc.

Then things will 'reset' on Dec 31 as far a RMD is concerned. I'll have to sell something in Jan 2021 to fund things for year 2021. Hopefully the market will be up - or if it rises back near the peak, I'll do it then - to avoid another drop.

I'm 73. I'm unlikely to outlive my IRA......even now at a 20 year SWR...which I am not taking...just what the IRS deems I got to take - about 4% now....

We always have the discussion of those favoring keeping some cash cushion, vs those who wait till the end of the year, when usually (but not always) their portfolio has grown during the year - to take their distribution by selling stock......

Without a waiver this year, many of them could really be hurting - depending what stocks they own. Some have cratered 50%. I doubt we'll be back to 29,000 any time soon.


t.
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"With the normal dividend "

*****************************************************************

Dividends may not be maintained by all companies. Ford cut theirs but Ford
and the auto industry are notorious for cutting dividends. We'll need to
keep an eye out - as earnings may not stay as planned by the best and brightest.

Howie52
Dividends and interest payments may just not be what anyone expected as "normal" for a
while.
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. . . does it make any difference in 20 years whether or not you took this year off of taking the RMD?


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I would humbly suggest that you are neglecting the Fact that every dollar of an RMD is taxed as Ordinary Income, whereas income from a regular account benefits from the characterizations of Capital Gains & Qualified Dividends.


Me? I converted to Roths decades ago. My only (minor) gripe is that the SECURE Act eliminated the stretch on inherited Roths, & now the entire inherited Roth has to be disbursed by 10 years. Oh well, I'm sure my children will have bigger problems. ;-)


sunray
a man in FLA


p.s. Market bottoms are a good place/opportunity to convert to Roths!
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p.s. Market bottoms are a good place/opportunity to convert to Roths!

Last year we took money from my IRA and put it in the Countess's Roth. Maybe we need to do that again. Do I get credit for my RMD?

CNC
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Hello all, hope everyone is well and staying home.

I have not seen anywhere where RMD's are deferred this year? Maybe my old eyes don't see it. So far I have been able to have enough cash to pay out my RMD's which I do monthly, and sweep it into my taxable account. Taxes are paid every distribution.

From what I read here, I can stop the distributions now?

Stay safe

Birgit
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Yes, the bill specifically eliminates any need to take an RMD in year 2020. You could take zero if you have taken none so far. (you can't pay it back, though, if you took RMDs).

As usual, your RMD for next year will reset to the value on Dec 31, 2020

You can look at it as an opportunity to move cash to stock funds now if you think this is a 'bottom'......and dividends and distributions from funds if you normally take those as part of your RMD withdrawal.

You could avoid any need to sell stocks/funds at a current values





t.
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Don't forget that if you do a charitable deduction through your RMD it is exempt from taxes. This is important as many are contributing to food banks etc in this time of crisis.
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If I can waive my 2020 RMD, my Social Security benefit will not be taxable and my estimated taxable income for 2020 will drop to around $16K. This would place me in the 12% marginal tax bracket.

It also will reduce your Medicare monthly payments.
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We don't need the RMDs to live on so that's cool they realized making these periodic withdrawals while the market is down could really hurt.

The RMD Holiday for 2020 primarily benefits those households who are at the RMD age but do not need most or any of the withdrawal for household income. It does not benefit those who already are withdrawing at least the RMD amounts, as they are going to be making the withdrawal anyway.

A couple of points from previous comments

If you have already withdrawn your annual RMD and do not require it for income, you may roll it back into your TIRA providing your withdrawal was after January 31, which will be 60 days prior to Monday, if my day count is right, and assuming you have not done an IRA rollover in the past 12 months.

Inherited IRAs may also skip the RMD for 2020, but may not roll it back into the inherited IRA if the RMD has already been taken even if within 60 days.

If 2019 was the first RMD year and the RMD has not yet been taken, that RMD may be skipped as well as the 2020 RMD. IOW, a double RMD holiday for those not needing the income.

BruceM
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Does the RMD suspension for 2020 include suspending the RMD requirement from a Beneficiary IRA (ie., inherited IRA from parent)?
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Does the RMD suspension for 2020 include suspending the RMD requirement from a Beneficiary IRA (ie., inherited IRA from parent)?

Go back one and read my post. I answer your question there.

BruceM
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