RMD Timing (move, inheritance, married, taxes)

[leastprime]

repeat of TuborgP.
Another QUACKer. (QUalified ACcount acKnowlegder).
{meaning that person deferred too much income in qualified accounts and now faces withdrawals at high tax rates}. Alternative would be use of taxable, deferred, long-term investing and enjoy a cap on LTCG offset by LTCL, or the use of RE and depreciation.

QCD is a good use of excess funds and for RMD.

disclaimer.
I didn't withhold enough in 2023 on doing an the estimated tax. Will probably face a small penalty. Need to send a "quarterly 2023" payment, to approximate 2023 obligation, asap. Low income bracket.
A substantial part of our retirement Income is from GWLB variable annuities which are based on a fiscal year. We have many annuities. Whereas RMD's are calendar year. Tax year 2023, was trying to align systematic withdrawals to RMD's. So far, RMD's is less than making the maximum allowable annuity withdrawal.

For tax year, 2024, we will do estimated quarterlies that better follow our fairly newly estimated income flows.

[leastprime]

Originally Posted by caco54

I’m almost at RMD time. I have a substantial pension, SS for the wife and I that covers most of our day to day needs. I could take the RMD in January/February and dump it into the money market account currently earning 3.5%, leave it in the stock market and take it monthly, or leave it in the market and take it November/December.

We will be in a fairly high tax bracket so a Roth conversion might not work. Thoughts?

If you have a good handle on your tax obligation, pay either quarterlies, or all in the 1st or 2nd quarterlies.

If you have to sell shares to make RMD, pay RMD while stock market is high.

I don't like doing Roth's in retirement. Too fraught with the possibility of a multiple years of falling economy-markets.

[Perryinva]

That is correct, of course. And I am sure that if there is even a months delay after the taxes for that quarter are technically due, there would be no penalty. In my case, the original Roth conversion was made in March, with the state taxes not paid until November, which triggered the small penalty. Because I have decided to stop doing conversions for at least 7 more years, and have decided to collect my SS starting next month, my total tax liability for 2024 should be about $5000 less than it was for 2023, I will see more growth for my retirement accounts since my income will exceed my expenses considerably. As it is, my accounts are still higher than they were when I retired 5 years ago, and I am not that good of an investor. Long term,market index funds would have beat all my choices. As it turned out, my current funds, like many this past year, grew leaps and bound, adding over $250k to where they were at their lowest point in October. Had I switched to market index funds jn October, my recovery would have been less. But at some point, before my major RMDs go in effect, I should just put them on autopilot with index funds and then do what has been recommended here and take the RMDs at the end of the year, & pay the taxes then.

[selhars]

I'm trying my darnedest to follow the conversation.

The OP didn't even ask about taxes but somehow the thread got into that -- which is fine...I'm just trying to follow it.

Like the OP I will have a pension, IRAs and taxable accounts (and eventually Soc. Security).

If taxes are taken out of all of my various "incomes" at the time their paid to me -- whether it's the pension, SS, or eventual RMDs.... is there a need for estimated tax payments at all?

[BellaDL]

Originally Posted by selhars

If taxes are taken out of all of my various "incomes" at the time their paid to me -- whether it's the pension, SS, or eventual RMDs.... is there a need for estimated tax payments at all?

If the total amount of withheld taxes are close to your tax liability for the year (100% of current tax year or 90% of previous year), there is no need to pay any estimated tax payments. If not, you have to pay additional taxes in estimated payments to avoid underpayment penalties.

As I mentioned in previous posts, I handle our tax payments by using previous year Turbo tax program to estimate our tax liability for the current tax year to decide how much estimated tax payment that I should make for each quarter.

I also use the program to figure the amount of Roth conversion so that it does not bump us up into the next tax or IRMAA Medicare premium bracket. Since a good portion of our income come in December, we wait just before the end of the year to do the conversion.

I keep a spreadsheet to log each quarter income and tax payments and rerun turbo tax if needed if there are significant changes in our estimated income for the year.

[BellaDL]

Originally Posted by BellaDL

If the total amount of withheld taxes are close to your tax liability for the year (100% of current tax year or 90% of previous year)

Correction! I meant 100% of previous year tax liability or 90% of the current year!

[leastprime]

Originally Posted by selhars

I'm trying my darnedest to follow the conversation.

The OP didn't even ask about taxes but somehow the thread got into that -- which is fine...I'm just trying to follow it.

Like the OP I will have a pension, IRAs and taxable accounts (and eventually Soc. Security).

If taxes are taken out of all of my various "incomes" at the time their paid to me -- whether it's the pension, SS, or eventual RMDs.... is there a need for estimated tax payments at all?

Pensions, IRAs, Roth, Annuities, 401k, 457, etc.. are Tax Deferral programs, obstinately for your retirement. Hence taxes are always involved in deferred, qualified financial plans. The RMD is the recognition of your retirement and extinguishing the tax deferral over your statistical lifetime.
vs
Taxable accounts are tax accounted in the year incurred (generally).

OP, situation, is discovering he really didn't need to "obstinately," have as much deferred investments-retirement income because his investments has done extremely well.
YRMV

[selhars]

I plan to just adjust my withholding to not have to concern myself with estimated payments. That's all.

Now, if my CPA explains to me a reason, that IMO, is good enough to override my desire to do it that way, then I'd consider reconsidering. But given that I really don't want to do it he'd better have a really good argument.

[leastprime]

Originally Posted by selhars

I plan to just adjust my withholding to not have to concern myself with estimated payments. That's all.

Now, if my CPA explains to me a reason, that IMO, is good enough to override my desire to do it that way, then I'd consider reconsidering. But given that I really don't want to do it he'd better have a really good argument.

That works too. I may just do the 10% standard withholding on the qualified accounts's distributions.

[Perryinva]

Mine is more complicated in that DW doesn’t have any taxes withheld from her SS, inherited IRA RMD, or pension. When I was working and she was retired, it made her feel like she had more of her own money and I just increased my withholdings accordingly. Now that we are both retired, both with a couple of inherited IRAs that have RMDs, coupled with random income and conversions, it just became more complicated. 2024 will be easier.

The OPs original question is basically tax based, which is how it morphed. Whether you take it early and invest the post tax amount or wait until the end of the year and let it all grow makes basically no difference unless there are end of hear possible liabilities that could make a difference, which is what Belladl & I were pointing out. You just have to be aware how the RMD, which is taxable income, affects your tax bill, both federal and state.