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suelen

What To Withhold When You Are Forced To Take Rmd

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My wife is reaching 70 and 1/2 and has been informed that it's time to deal with

Required Minimum Distributions for Members

It says:

"If you elect to receive an RMD payment from TRS,
you may designate on the “RMD Election Form” the
percentage of federal withholding to be applied to
your RMD."

 

Does that mean the form will give her a chance to put in an actual % amount-

even as high as something like 35%. I'm new to this forum--am I in the right place to discuss

this topic. Regards, Len

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Guest Joel L Frank

Hi Len:

 

Your wife received this letter because she will turn 70-1/2 in 2013. Your wife's first RMD is taken by 12/31/13 and the distribution is based on the value of the account on 12/31/12.

 

RMD are not subject to Federal withholding, however, if she does not voluntarily withhold she will have to pay the tax due by April 15, 2014. Most people withhold as a matter of budgeting. The percentage is up to her. If she uses a tax preparer she may want to get a call into him/her.

 

Best,

 

Joel L. Frank

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Len,

 

Great question and sure to provide plenty of interest. What is the purpose of the proceeds?

 

Legacy Money....0% withholding and pay the taxes from your other millions. Move it all to a Roth IRA for your heirs.

 

Spending Money....20% withholding and go buy a new car.

 

Tax Money....100% withholding to pay capital gains taxes on all your other investments.

 

There are many others and everybody can learn from this question!!!! I hope everyone participates!!!!

 

This is a great success problem....only because you planned wisely!!!

 

Bob

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Guest Joel L Frank

Len,

 

Great question and sure to provide plenty of interest. What is the purpose of the proceeds?

 

Legacy Money....0% withholding and pay the taxes from your other millions. Move it all to a Roth IRA for your heirs.

 

Spending Money....20% withholding and go buy a new car.

 

Tax Money....100% withholding to pay capital gains taxes on all your other investments.

 

There are many others and everybody can learn from this question!!!! I hope everyone participates!!!!

 

This is a great success problem....only because you planned wisely!!!

 

Bob

Hi Bob:

 

RMD may not be converted to a Roth IRA.

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Len,

 

Great question and sure to provide plenty of interest. What is the purpose of the proceeds?

 

Legacy Money....0% withholding and pay the taxes from your other millions. Move it all to a Roth IRA for your heirs.

 

Spending Money....20% withholding and go buy a new car.

 

Tax Money....100% withholding to pay capital gains taxes on all your other investments.

 

There are many others and everybody can learn from this question!!!! I hope everyone participates!!!!

 

This is a great success problem....only because you planned wisely!!!

 

Bob

 

Hi Bob,

It doesn't matter what the purpose of the proceeds from a tax deferred account beginning at 70.5 is. It's the law.

have a great evening,

Steve

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Steve and Joel,

 

Thanks for responding. My point is: a sound retirement plan contains many variables and must anticipate the RMD. By following the laws (403, 457, 401, annuities, Trad IRA, Roth IRA, IRA conversions, etc), the RMD can be anticipated and manipulated. The intent was to broaden the investment horizons and stimulate discussion.

 

Bob

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Steve and Joel,

 

Thanks for responding. My point is: a sound retirement plan contains many variables and must anticipate the RMD. By following the laws (403, 457, 401, annuities, Trad IRA, Roth IRA, IRA conversions, etc), the RMD can be anticipated and manipulated. The intent was to broaden the investment horizons and stimulate discussion.

 

Bob

 

Hi Bob,

What did you have in mind?

Steve

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Steve,

 

I think a lot of lurkers could learn, participate, and benefit from the type of question that Len has asked. The RMD is not a surprise!!!!

 

Considering your age, RMD tax tables, and the size of your portfolio, what do you think of Ed Slott's philosophy regarding tax payment?

 

Bob

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Bob,

 

You wanted people to lurk and learn and you wanted a discussion. Well, I am trying to have a discussion with you. That's how it works here. Nobody else is going to come in a identify Mr. Slott because we are having the discussion right now and you brought up his name. I don't know Mr. Slott, so you tell us what his philosophy is. If you don't know, let us know because in the manner in which you brought it up meant to me, at least, that you know his philosophy. I guess I was wrong.

You want to talk about taxes and RMD and I agree that its important topic. But now it looks like you dropped the ball.

 

I don't understand where you are going with this and if you want a discussion you have to lead the way.

Steve

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Steve,

 

According to the WSJ, Barrons, and most all major business publications, Ed Slott is a leading authority in the U.S. regarding IRA, ROTH IRA, and IRA conversions. His writings and teachings can easily be found on Google. Generally speaking, he advocates the payment of taxes prior to age 70 1/2 and avoiding the RMD.

 

Bob

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Why pay taxes early?

If you convert to Roth you do not have to take an RMD on Roth's so if you don't need the cash to live on you can keep it in a tax qualified status and save yourself and heirs taxes for the rest of your life and that of the beneficiary.

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