Required Minimum Distributions (RMD) are the mandated distributions of funds from Qualified plans such as IRA’s, 401k’s and the like.
Here, here and here we discuss RMD’s and differing techniques to appease Uncle Sam/IRS in great detail…
Since RMD’s amounts are based on age and prior year ending account balance the mandatory amount changes year by year.
One option we like is spreading your RMD out over the year, creating your own “Person Pension” plan – of course as long as you take at least what Uncle Sam says, you are good…
Bottom Line – this is RMD adjustment season.
Monday is a holiday in honor of Martin Luther King, and as such markets, banks and our office will be closed.
Ahhhh….. today is a Friday as we brace for the coldest front of the year – and of course an out-door tennis tournament is calling (the girls get warm in about 5 minutes – parents freeze! All good)
In our explanative post here, we overview the RMD season items …. and remind those in the first year of their chose to defer or take …
RMD $$ mandated amounts are determined by the value of applicable accounts on the last day of the prior year
Current year age is a necessary factor included in calculating the RMD – see below next, first time exception – each year of seasoning (getting older) we are forced to take more out of the applicable accounts – hey the IRS has never taxed us on these in many cases – it’s their time!
After tax contributions to a qualified account MUST be accounted for in order to avoid taxes – here are greater details and our taxpayer obligations on this – don’t overpay – the IRS is not tracking this and will not come to the rescue and lower your taxes
All of an individual’s accounts must be included/totaled/value (certain exceptions are made to those continuing to work) to ascertain the needed distribution
Any one account can be used to satisfy the needed distribution (you do not have to take a little from each account, making it easier from an organization standpoint) BUT you must take at least the minimum distribution
Failure to take the mandated distribution amount COULD result in a 100% tax – Break in – our experience has been the IRS is nice about this, but let’s not test them
Social Security COLA Bump
Congratulations to those on a fixed income, the Social Security Administration SSA’s favorite inflation gauge measured a 2.8% increase, which we review in our post here and also even created this neat historical graph for our collective review…
Capital Market Comments –
Suddenly it’s Raining?
After a drop at the beginning of 2018 – mostly blamed on a creative synthetic product that bets risk will stay low (XIV) our patience was rewarded and footing found … until Ugly October came to roost…
What Gives?
At this time, no one with 100% certainty, can pin point what turned the market sky’s grey and sent rain…
Oddly, it may not be any one thing, just like an auto accident – usually multiple items occur at the same time that lead to an opening for contact with another …
Here are our best thoughts in order of our priority/possibility – again no one knows for sure…
Trendy high flying stocks that have been a momentum favorite, suddenly took it on the chin – alone in time not a big deal – seen next
Most mutual funds and many other assets managers close their books at the end of October – many heavily invested in the above trendy stocks had their year turn very ugly right at the finish line, possibly setting a musical chair like exit, causing much more volatility than what would have otherwise occurred if not so near the end of many fiscal years – an extra worry juggle ball in the air
Mid-Term elections are finally here, and it is unlikely anyone can predict with any certainty the outcome of the elections – capital market participants hate uncertainty – not a big deal if this was all they are watching, but another juggle/worry ball up in the air
Interest Rate Increase banter on how many an how long rates will increase before being “Normal” – we have discussed in great length the inverted yield curve and while we are no where near this event, yes… another juggle worry ball in the air
Tarif Talk has been around all year, but looks to come to more of a peak near the end of the year – yet another worry/juggle ball up in the air
The good news is the sun will likely come out again soon, but in true rain like fashion, it seems like the days go by SLOOOOWER when your stuck inside, under cover, without sun!
The GREAT news is earnings have been for the most part very good, not GREAT and screaming as they had earlier in the year, but still very good by comparison.
MAYBE ? – we are just overdue for a correction – This fantastic chart from our friends at JPMorgan reminds us all that these type of corrections are more of the norm, not the abnorm – we have just been without regular bouts for some time!
Have a Great Day – Talk to you at the end of November!
RMD – AKA Required Minimum Distributions – the Governments’ mandate of distribution from our IRA (Pre-Tax) funds in order to finally occur taxes is upon us…..
RMD Season
In the coming weeks we will begin transferring mandated funds from our IRA/Qualified/Pre-Tax accounts to their directed destinations….
As a reminder this is so the US Government gets to take the taxes due …
IMPORTANT (Neat) Facts –
RMD $$ mandated amounts are determined by the value of applicable accounts on the last day of the prior year
Current year age is a necessary factor included in calculating the RMD – see below next, first time exception – each year of seasoning (getting older) we are forced to take more out of the applicable accounts – hey the IRS has never taxed us on these in many cases – it’s their time!
After tax contributions to a qualified account MUST be accounted for in order to avoid taxes – here are greater details and our taxpayer obligations on this – don’t overpay – the IRS is not tracking this and will not come to the rescue and lower your taxes
All of an individual’s accounts must be included/totaled/value (certain exceptions are made to those continuing to work) to ascertain the needed distribution
Any one account can be used to satisfy the needed distribution (you do not have to take a little from each account, making it easier from an organization standpoint) BUT you must take at least the minimum distribution
Failure to take the mandated distribution amount COULD result in a 100% tax – Break in – our experience has been the IRS is nice about this, but let’s not test them
The mandatory commencement date of RMD’s is the year AFTER you turn 70.5 years young, under current tax law…
If you accept this first year deferral, you will incur two RMD’s in the year you commence your first RMD…
Depending on the situation, it may be advisable to distribute your first year RMD a year early so as not to clump your taxable distribution….
Is your DOB between 7-1-47 to 6-30-48?
Then you turn 70.5 in 2018 and you CAN defer your RMD until 2019, however you will have two RMD’s next year — be careful, large distributions could toss you into an extra tax bracket.
Reach out if you have ANY questions, we have plenty of time, BUT the clock is ticking…
Here is our November 2017 Monthly review. If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast format.
In our post here this month, we reminded all of those with birthdays between 7-1-46 and 6-30-47 that have the unique option of deferring their first mandatory RMD taxable distribution to next year, but if you do that will mean you need to take two distributions in the same year.
Considerations:
Higher/Lower Income
Bigger/Smaller Expenses
More/Less Donations
The first year is the only time we get this option, all the future years are mandatory with not option.
Capital Market Comments
A lot of positive indicators – Markets taking notice
It appears the US and Global Economies are finally making a synched recovery. Capital Markets are taking notice.
As we mentioned here, Unemployment rate hit a very low 4.1%
This time, International Markets have wind in their sails as well….
According to current law, the IRS mandates RMD’s (Required Minimum Distributions) from your qualified account by April 1 of the year following age 70.5.
RMD Delay First Year
Given the above IRS requirement, it is possible to delay your first RMD until April 1 of the following year, once you reach the 70.5 threshold.
If your Birthday as of the year 2017 is between 7-1-46 and 6-30-47 YOU CAN delay your initial mandated RMD, however by doing this, you will have two RMD’s in 2018 tax year.
Higher/Lower Income
Bigger/Smaller Expenses
More/Less Donations
These are a few items to consider when delaying or taking that initial RMD.
Feel free to reach out to us if you have any questions!
After this decision … the IRS makes it easy, each year take your RMD and pay the taxes, only on the first RMD, is the delay allowed!
Required Minimum Distributions (RMD’s) can be deferred for the FIRST year after you turn 70 and 1/2 years young. Sounds neat huh…. CAUTION !
Deferring Your First Year RMD Causes a Double Dip
If you choose to defer your first year RMD, be aware you will HAVE to “Double Dip” and take two distributions the following year. This may cause adverse tax consequences!
Once you pass, you have no other choice, and not making a decision IS making a decision.
Confused ?? Not to worry, you still have time this year … Well, until 12-31-15 ….. Just give us a call !
The end of the year is only two and one half weeks away. With the second year of massive phase outs of deductions, optimizing taxes is very important. There are still tax savings ideas that can really help your pocket-book when the tally is settled in April.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, please consult your financial advisor prior to investing!
Background
The is the vocal portion of J.K. Financial, Inc. a Dallas Texas Based Fee Only Total Wealth Financial Planning Firm. Founded by John Kvale, a Dallas Texas Fee only Financial Planner and Total Wealth Manager.
October — BOOOO- 2018 Podcast Video, Financial Planning and Capital Market Update – By John Kvale
Hello and Welcome to our October 2018 Financial Planning and Capital Market Update!
If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast format as well as Video!
Newbies – We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets and current events!
October – Booo – 2018 Video
Break In – Holiday Party Reminder
Financial Planning Tip (s) –
RMD Season
In our explanative post here, we overview the RMD season items …. and remind those in the first year of their chose to defer or take …
Social Security COLA Bump
Congratulations to those on a fixed income, the Social Security Administration SSA’s favorite inflation gauge measured a 2.8% increase, which we review in our post here and also even created this neat historical graph for our collective review…
Capital Market Comments –
Suddenly it’s Raining?
After a drop at the beginning of 2018 – mostly blamed on a creative synthetic product that bets risk will stay low (XIV) our patience was rewarded and footing found … until Ugly October came to roost…
What Gives?
At this time, no one with 100% certainty, can pin point what turned the market sky’s grey and sent rain…
Oddly, it may not be any one thing, just like an auto accident – usually multiple items occur at the same time that lead to an opening for contact with another …
Here are our best thoughts in order of our priority/possibility – again no one knows for sure…
The good news is the sun will likely come out again soon, but in true rain like fashion, it seems like the days go by SLOOOOWER when your stuck inside, under cover, without sun!
The GREAT news is earnings have been for the most part very good, not GREAT and screaming as they had earlier in the year, but still very good by comparison.
MAYBE ? – we are just overdue for a correction – This fantastic chart from our friends at JPMorgan reminds us all that these type of corrections are more of the norm, not the abnorm – we have just been without regular bouts for some time!
Have a Great Day – Talk to you at the end of November!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
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Posted in General Financial Planning, Insurance, Interest Rates, Investing/Financial Planning, Market Comments, Monthly Review, Podcast, Video
Tagged Fang, RMD, Social Security