FIRST EVER RMD AT AGE 72
HELLO. I HAVE ATTENDED AN “INVESTMENT SEMINAR” RECENTLY, AND AS A RESULT, I HAVE A QUESTION. I WILL TURN 72 IN AUGUST / 2023, AND I WISH TO TAKE MY 1ST “RMD” IN DECEMBER 2023, THE SAME YEAR I TURN 72. I DO NOT WISH TO TAKE TWO “RMD’S” — IN 2024, AS YOU COULD DO. SO, DO I PROJECT WHAT MY “RMD” AMOUNT WILL BE — ON 12/31/23, AND ADD IN A FEW THOUSAND TO THE ACTUAL AMOUNT — BASED ON THE MARKET CLOSE, SAY ON DECEMBER 20TH, 2023 — JUST IN CASE THE MARKET WILL RISE BETWEEN THE 21ST AND THE 31ST? SO, IT WILL ACTUALLY BE MY — “BEST GUESS” — BASED ON THE INFORMATION I HAVE ON FILE. BASICALLY, I AM ASKING THE COMMUNITY HOW THEY TOOK THEIR FIRST RMD — IN THE SAME YEAR THAT THEY TURNED 72. HOW DID YOU CALCULATE YOUR RESPECTIVE RMD AMOUNT?
Permalink Submitted by Dan Zaehring on Fri, 2022-04-01 22:12
If your first RMD is for the year 2023, then the amount is based on the value on 12/31/22. That amount should already be known precisely.
Permalink Submitted by ANTHONY SOKOLICH on Sat, 2022-04-02 17:15
SO, IF THE “RMD” AMOUNT IS BASED ON MY PORTFOLIO VALUE ON 12/31/22 ….. WHEN I AM STILL (71) — TECHNICALLY SPEAKING, WHAT DATE IS THE DUE DATE FOR MY FIRST “RMD?” WOULD IT BE THE DATE WHEN I ACTUALLY TURN 72? I BELIEVE THERE IS A LOT OF CONFUSION OUT THERE ON THIS PARTICULAR TOPIC. THE FOLKS CONDUCTING THE SEMINAR THAT I ATTENDED WERE NOT CRYSTAL CLEAR ON THE SUBJECT MATTER. PLEASE WEIGH IN. AT THIS TIME, I GUESS I’ll ALSO TURN TO THE INTERNET — FOR ADDITIONAL GUIDANCE. THANK YOU!
Permalink Submitted by Alan - IRA critic on Sat, 2022-04-02 19:48
Your first RMD for the year you turn 72 is not late until 4/1 of the year following the RMD year, that is 4/1/2024. This is a special time extension that only applies to your first RMD. Every year thereafter, the RMD must be distributed by the end of the RMD year.
Therefore your IRA value on 12/31/2022 will be used to calculate the amount of your first RMD, which you can take anytime up to 4/1/2024. You can also take any part of the first RMD in 2023 from nothing to the full amount. Any remaining amount must be taken by 4/1/2024. This RMD is taxable in the year you distribute it, so amounts you distribute in 2023 are taxable in 2023, and amounts you defer to early 2024 are taxable in 2024. The date of 4/1/2024 is your required beginning date (RBD), the last date on which you can complete your first year 72 RMD.
These rules vary somewhat for non IRA employer plans. The above comments apply just to IRA accounts other than Roth IRAs.
Note that any distribution you take starting 1/1 of the year you reach 72 is treated as applying to your RMD, even though you are not actually 72 yet. As such you cannot roll over such a distribution since an RMD is never eligible for rollover, and a Roth conversion is a rollover.
Permalink Submitted by Alan - IRA critic on Fri, 2022-04-01 23:44
Note that if you complete your first RMD in 2023, your 12/31/2023 value will be lower than if you deferred all or part of that RMD to 2024. Nonetheless, while it usually is beneficial to take your first RMD in that first year, there are exceptions, notably due to the way SS is taxed, where some combination of first year deferral to year 2 may produce the lowest total tax bill for the two years. It takes some number crunching late in year 1 in order to determine your optimal split of the first year RMD.
Permalink Submitted by ANTHONY SOKOLICH on Mon, 2022-04-04 18:44
OKAY. I NOW HAVE MY ANSWER. I NOW SEE THAT 12/31/2022, IN MY PARTICULAR CASE, SEEMS TO BE MY “KEY DATE” — AS FAR AS DETERMINING MY VERY 1ST RMD. I ALSO SEE THAT THERE IS SOME NEW LEGISLATION PENDING — WHICH IF PASSED BY BOTH THE HOUSE AND THE SENATE, IT WILL MEAN THAT AGE (73) WILL BE THE NEW RMD AGE FOR A PERSON’S 1ST RMD. IT APPEARS AS THOUGH THE “HOUSE” HAS ALREADY PASSED THE LEGISLATION, AND IT HAS BEEN SENT TO THE SENATE. IT IS KNOWN AS THE “SECURE ACT 2.0.” SO, IN EITHER CASE, I AM NOW ON THE RIGHT TRACK. THANKS FOR OUTLINING ALL OF THIS FOR ME. IT DOES MAKE PERFECT SENSE NOW.
Permalink Submitted by Alan - IRA critic on Mon, 2022-04-04 22:50
Yes, if the House version passes effective 2023, all your above dates would be advanced by 1 year, eliminating your 2023 RMD, but increasing later RMDs by roughly 4%.