With the passing of the SECURE 2.0 at the end of 2022, there are now 4 RMD ages depending on the year of birth, as this table shows. One can determine their beginning year by adding the birth year to their RMD age.
How best to manage one’s investments in their TIRA depends on what the RMD will be used for. If it is all required for household income, then the traditional use of stock/bond investment allocation, periodic rebalancing and a ‘cash bucket’ in the TIRA with, perhaps, programmed monthly withdrawals will work best for many.
But like about 20% of TIRA owners, we don’t need the RMD to live on, so we use ours for charitable contributions via Qualified Charitable Distributions and then in December, do a cash withdrawal and send X% to the IRS for tax withholding for the year. We do this to avoid quarterly estimated payments to the IRS during the year. To generate sufficient cash, we’re invested in high dividend stocks such as regulated utilities, REITS and some consumer staples, with brokered CDs making up about 1/3 of investments today, as we can get 5.4% when our RMD is under 4%. And as long as the CD amount is under $250,000, the CD is 100% insured.
Basically, doing a QCD essentially gives you an above-the-line deduction, doesn’t get included in AGI, and thus doesn’t cause IRMAA to rise or any of the other stuff associated with a higher AGI. And you still get the full benefit of the standard deduction.
Yes, I thought of doing that, but reasoned this is more ‘IRA’ than about tax.
Another curio point some might find interesting is the years 2020 and 2033 will have no first year RMD’ers, and to get your RMD year, you simply add your birthdate to your first RMD age. So someone born in 1958 will have an RMD begin year of 1958+73 = 2031.
And as Roth IRAs go, another change of SECURE 2.0 is a Roth-401k left with the employer will no longer be be subject to RMDs beginning 2024, but interestingly will be subject to an RMD this year.
Yes, this is my second RMD year and I’ve got my 9 charities all lined up for QCD’s I’ll have distributed the first week of December, that make up about 10% of my RMD.
The QCD has exactly the same tax effect as an itemized deduction for those who still itemize (very rare with retirees) with the added bonus of not adding to your AGI. Kind of odd accounting though…you must include the QCD in with the full RMD (or just plain TIRA withdrawal if you are at least 70.5 but not yet at RMD age) as shown on the 1099R in box 4a of the 1040SR, but then subtract it out for Box 4b and then write ‘QCD’ in the margin. Not sure if the IRS will ever get around to giving the QCD its own distribution code.