Required Minimum Distribution Calculation Discrepancy

Ltssharon | Aug 3, 2023 | 471 posts since 2020

Hi. I am 73 and single. I have to make a cd decision tomorrow. To make the decision I need to know how much required minimum distribution I will need to take out this year.

When I go to irs.gov, it seems to say when I go to the tables, that I use 16,4 in the denominator. When I go to other websites it seems to say that I use 26,4,

I understand that I take my trad ira balances on dec. 31 2022, add them all together, and then divide by the denominator which is supposed to be a life expectancy. What should I divide by given that I get these two different numbers, 16.4 versus 26,4

Thank you

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Answers

MY2CENTSWORTH | Aug 3, 2023 | 436 posts since 2016

Ltssharon, this is the correct table for 2023 RMD for an individual your age through age 80. I believe that you may have been looking at a table for beneficiaries of an IRA on the IRS website. I didn't see 26.4 anywhere I looked but your FI should be able to confirm whether or not the 26.5 is the correct number. I also added this link for you from the Fidelity website that has a calculator that you may find useful. https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/UniformLifetimeTable.pdf I hope this helps.

IRA required minimum distribution (RMD) table
Age of retiree/Distribution period (in years)
72 27.4
73 26.5
74 25.5
75 24.6
76 23.7
77 22.9
78 22.0
79 21.1
80 20.2

Ltssharon | Aug 3, 2023 | 471 posts since 2020

Thank you so much. There are soooo many tables. Now I am all ready for my trad ira cd maturity decision tomorrow. In case anyone wants to know, I am making the decision within Connexus credit union. their 1 year and 15 month, and to some extent 2 year cds are good. I get an extra 10 points if I just let my cd roll over tomorrow. That makes connexus even more attractive. My2centsworth thank you so much.

MY2CENTSWORTH | Aug 3, 2023 | 436 posts since 2016

Ltssharon, you're very welcome and I also added a link that you may find useful. I use Connexus and find them to be very good as well and you may or may not realize that they and other FI's may allow you to take RMD's from an existing IRA before it matures, in case you don't necessarily need the funds now and want to leave or reinvest them in a higher paying account for another five months or you can obviously reinvest the RMD that you receive into the account of your choice. It sounds like you have an IRA that matures but you may have another in the future where you can take the RMD from an active certificate before maturity without paying a penalty.

Ally6770 | Aug 3, 2023 | 4,292 posts since 2010

For several years I have called my credit unions and banks to get all the amounts I have to take out for that year at the end of Jan as things have usually slowed down for them. In Dec I take it out of the lowest interest one. If your IRA's are invested you can call the companies and they will tell you or at least they used to. I know that the schedules changed for some people a couple of years ago. So I just call them. In Dec I arrange to have all of the required RMD's all taken out with the one with the lowest interest rate. Some you have to mail in a form and some you can just message them in PM. Where it is now I have them put it in a free checking so I can write a check. Mail can take a week and even longer and even the email of your scanned mail you will get that day sometimes like yesterday I did not get. I let them know. This has happened before but I don't want it to happen with a check. I then will let Navy know how much I want taken out of the traditional IRA I have with them for my Roth conversion because Navy has no penalty when you take it out for a conversion where some other places do and by law you have to take your RMD before your conversion. By that time I know my income for the year. The conversion will be done usually 3rd week of DEC a week or so after my RMD and put in a Roth savings if I don't have a add on CD with them. The first of Jan they will transfer it to an existing Roth IRA CD I have at Navy or I call or PM them, or start new one if interest rates are higher for the Roth. Last year they raised the rates on all the CD's for me. And I was able to split the Roth to have it mature in Jan and it accommodated my plans. They raised the rates all CD's even outside the IRA's. In Jan. FINALLY my last traditional IRA will mature that is not with Navy so in Jan. I will take all of the RMD from that one and maybe even the one at Navy so I don't forget and move it all to Navy. I will have have to take my 24 RMD in Jan in the other institution before I can move it to Navy. I have a big Roth that will mature in Jan with Navy and still have a smaller one there so I will arrange to transfer the maturing one to another institution and transfer the big Roth from Navy and still be insured. So I should be OK for insurance for a while even with interest. I may take my RMD's in Jan from now on because of my age so the children will not have to pay taxes on it the year I pass. Hopefully I will have time to mail to convert all the rest of traditional IRA in the year before I pass. I have the papers signed and filled out and 3 originals in the children's notebook as well as mine to mail. So if I or someone can mail or fax it then it will be done if I have notice that it is nearing the time. Sometimes we are given a time span when it will happen. I do not want the kids to have to pay taxes on it because they already have to pay taxes on my husband's traditional IRA's when I disclaimed them, but they have their lifetime to take that out. But they are retirement age now so I want them to have flexibility with their income. With everything in a Roth and still having to spend it in 10 years it will not affect their taxes or IRMAA or medicare premiums. The income they have will affect it and not anything I have left them.
Now hoping the raise the insurance at least on IRA's to $350,000 and this will only keep it up with inflation. Actually it would be $354,278.62 so maybe they can up the insurance similar with the formula for IRMAA used on IRA's.

Ltssharon | Aug 3, 2023 | 471 posts since 2020

Hi, how brilliant you are. I need to move to a state without the taxes on conversions, and do something similar. I need to rent a room somewhere to do so.

Ally6770 | Aug 3, 2023 | 4,292 posts since 2010

There are income taxes on withdrawals for conversions just as there are on RMD's but no taxes when Roth money is withdrawn. I have never withdrawn from a Roth CD early except when I closed the Roth early because of the amount and insurance and to get a better rate and there was no penalty from Achieva. Money withdrawn from a Roth also does not count as income for IRMAA. Navy has not in the past charged a penalty for withdrawals from a traditional IRA for conversions to a Roth. Many do. I must have stated it incorrectly.

choice1 | Aug 3, 2023 | 370 posts since 2023

Now that you know the amount…suggest you look (also) at using some ira funds to buy a charitable annuity …the June 15 WSJ had an article on it. Up to $50k for an annuity with the payout being taxable. I’m looking now and NFCU doesn’t have any forms nor knowledge on this new distribution method.

happyharold4 | Aug 3, 2023 | 388 posts since 2022

Also to lower tax liability I use a combination of QCD's, ( Qualified Charitable Distribution ) and the rest in RMD. RMD is taxable income whereas QCD's are not.

Ally6770 | Aug 3, 2023 | 4,292 posts since 2010

Yes. I have an inherited a small IRA. I donate the small RMD each year to the persons favorite charity. But even though I do it that way it is not deductible and I pay taxes, I feel that by doing it I am making that person smile as I stick the check in the mail or drive across town to deliver it. It is a local charity for local people.

Janicefr48 | Aug 4, 2023 | 40 posts since 2022

If you have the financial institution send the check to the charity for you it isn't taxed. We have done this for the last several years. When we take our RMD we have the financial institution send part to our church and part to IRS for the taxes we will owe on the rest and a check to us for what is left. It is not "deductible" but is deducted from the taxable amount of the RMD when reported to the IRS.

JeffinEasternFL | Aug 3, 2023 | 744 posts since 2020

Think of a QLAC as well ("longevity IRA annuity"), fromm Wikipedia:

A qualified longevity annuity contract (QLAC) is a deferred annuity funded with an investment from a qualified retirement plan or an individual retirement account (IRA). They are available for purchase through many insurance companies.

A QLAC provides guaranteed monthly payments that begin after the specified annuity starting date. As long as the QLAC complies with Internal Revenue Service (IRS) requirements, it is exempt from required minimum distribution (RMD) rules until the owner reaches age 85.

KEY TAKEAWAYS
A QLAC is a retirement strategy in which a portion of required minimum distributions (RMDs) are deferred.
The SECURE 2.0 Act of 2022 allows individuals to move $200,000 from a qualified retirement plan or IRA to a QLAC.
A QLAC allows taxes to be deferred that are normally required by RMDs.
QLACs are available for purchase through many insurance companies.

What Is An Annuity?
Understanding a Qualified Longevity Annuity Contract (QLAC)
A QLAC is an investment vehicle that allows funds in a qualified retirement plan, such as a 401(k), a 403(b), or an IRA, to be converted into an annuity.

An annuity is a contract purchased from an insurance company in which the buyer pays a lump sum or a series of premiums. The insurance company pays the annuitant beginning on a predetermined start date. How many years the owner receives payments depends on the type of annuity purchased.

I plan as well when RMD's begin to "defer" some of that taxable RMD income as long as possible by placing $200K+ (inflation adjusted I now believe) into a QLAC!

If ya don't need/want the income now or know you may be short if you outlive your expected mortality age, a QLAC can be the right choice!

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