Withdrawals before RBD apply to RMD?
I was 70 in 12/2012. My RBD is April 1, 2014. However, I understand that if I do not take a distribution in 2013, I will have to take two distributions in 2014. Clearly, I want to start in 2013.
If I made a distribution in Jan-Mar of 2013, will that apply to the RMD of 2013; since it will be taken before my actual RBD? In other words, do I have to wait until after my RBD to start RBDs in the year that RBDs start?
Whew… I can’t believe I just typed that… just re-reading it is giving me a headache 🙂
Thanks
Permalink Submitted by Alan - IRA critic on Sat, 2013-02-16 23:24
2013 is your first RMD distribution year. That means the first distribution taken in 2013 is deemed to apply to your 2013 RMD. If you have already taken a distribution in 2013 that is LESS than your RMD, you do not have to take out any more in 2013. You can defer any portion of your 2013 RMD to as late as 4/1/2014 meaning you are not limited to taking out -0- or 100% in 2013. But if you complete your entire 2013 RMD this year, your 12/31/2013 balance will be about 3.7% lower and therefore your 2014 RMD will be about 3.7% less than if you defer your entire 2013 RMD to 2014. Did this make your head ache even more? 🙂
Permalink Submitted by James Mitchell on Sat, 2013-02-16 23:43
Headache is the same; sadly, anxiety level just ratched up :-)I understand the principle of reducing the 2014 amount by reducing the value of the IRA in 2013. That’s a good point but a second-order effect. A first-order effect is caused by having a higher taxable income in 2014 if part of the 2013 RMD is carried over. All things being equal, it seems better to have uniform incomes from year to year and not a small one in 2013 and a large one in 2014.I know… all things are seldom equal… But in my case, I don’t have any large taxable items in either year for a carry-over make sense.The confusion comes from having to make a RMD in 2013 when my RBD is April 2014.However, my question remains….. since I am 70.5 in June 2013, will distributions made in February of 2013 apply to the RMD for 2013?
Permalink Submitted by Alan - IRA critic on Sun, 2013-02-17 01:17
Yes. Any distribution in 2013 counts toward your 2013 RMD, regardless of when made. And you are correct that if your taxable incomes will otherwise be about equal in both years, you should take your full 2013 RMD in 2013 leaving just your 2014 RMD for 2014.
Permalink Submitted by James Mitchell on Mon, 2013-02-18 04:15
Thanks very much. Does the same apply if I transfer from an IRA direcly to a charity before my RBD but in the same year? I would think so… oh dear, I must remember the dangers of “thinking” in these matters… 🙂
Permalink Submitted by Alan - IRA critic on Mon, 2013-02-18 16:36
A QCD cannot be done before the day you reach 70.5 (6/?/2013), which is 6 months after your 70th birthday. Therefore, if you want for RMD to be allocated as a QCD, you cannot take a distribution before 70.5 to the day. If you needed some funds for expenses now and only wanted your QCD to be half of your RMD, you could take out the funds for expenses now and then do a QCD after reaching 70.5 for the other half of your RMD. Only the first half would be taxable. Your RBD is 4/1/2014 and we do not yet know the fate of QCDs in 2014. Will probably have to wait until Dec, 2014 to see if Congress extends QCDs for 2014.