If you are buying into the market, almost everything is on sale and your investment dollar is going further than it did 6 months ago.
If you have to take RMDs, your RMD and tax bill look to be lower this year than last year.
Please add more if there are any.
“2. If you have to take RMDs, your RMD and tax bill look to be lower this year than last year.”
Wrong.
Your tax bill for 2022 was determined last December 2021. Your RMD amount was determined they at what now was ‘peak market top’.
If you had, say, a million in your IRA, you’ll be taking 3.5 - to 4% of that value , depending upon age, in RMD.
No matter what the market.
Some wait till Dec of the year, expecting the market to rise and rise like past few years - gaining another 11% typically, to cash in stocks and get the cash to pay the RMD withdrawal. Others might move money in Jan to ‘safer investments’ (bonds) or MMF to have the cash to pay the RMDs.
If you have to sell stocks in a down market, and it’s down 50% in December, and you waited till then, that RMD will appear to be 7 or 8% of your IRA…
Your RMD for 2023 will be determined in Dec 2022…whatever the market is. UP, down? who knows.
t.
The upside
If you want a few really great opportunities for entry, it does not take timing the markets at all. It takes studying the individual corporations and waiting for a yield you like.
If you have to sell stocks in a down market, and it’s down 50% in December, and you waited till then, that RMD will appear to be 7 or 8% of your IRA…
Just as a point of interest, if you already have other sources of cash and don’t need your RMD to pay the RMD taxes or living expenses, you can transfer stock out of your IRA. If you have the cash, this might make sense in a down market. Doesn’t change your tax situation but doesn’t force you to sell low, either.
AW
2. If you have to take RMDs, your RMD and tax bill look to be lower this year than last year.
No. Market was still reasonably high on 12/31/21, so this year’s RMD will be high. Next year’s is a different question.
You can calculate your own RMDs by dividing your **retirement account previous-year's end value** by the distribution period factor for your age that you will obtain for that given year.
https://www.forbes.com/sites/davidkudla/2022/03/28/how-the-i…
IP
Just as a point of interest, if you already have other sources of cash and don’t need your RMD to pay the RMD taxes or living expenses, you can transfer stock out of your IRA. If you have the cash, this might make sense in a down market. Doesn’t change your tax situation but doesn’t force you to sell low, either.
The RMD on my inherited IRA is pretty small, which may be why I am able to do it this way, but I don’t reinvest income from my holdings and have it put to cash to pay my RMD. Keeps me from having to sell holdings at a low, or a high for that matter.
IP
AW:“Just as a point of interest, if you already have other sources of cash and don’t need your RMD to pay the RMD taxes or living expenses, you can transfer stock out of your IRA. If you have the cash, this might make sense in a down market. Doesn’t change your tax situation but doesn’t force you to sell low, either.”
NO different if you have something like Vanguard…selling in the IRA…and buying exactly the same in a taxable account. Right?
It’s not like company stock in a 401K.
The entire amount of your stock distribution then is taxable and the basis is the total price of the transaction.
You don’t get the benefit of a lower original cost.
t.
NO different if you have something like Vanguard…selling in the IRA…and buying exactly the same in a taxable account. Right?
Pretty much the same unless the price of the stock changes between selling and buying. Plus a little more work (sell, transfer, buy vs just transfer).
The entire amount of your stock distribution then is taxable and the basis is the total price of the transaction.
You don’t get the benefit of a lower original cost.
Yes, the entire stock distribution is taxed as ordinary income.
One downside to the stock transfer is making sure your broker changes the cost basis (or you keep good records) to the stepped up value when transferred as an in-kind distribution. Otherwise you’ll be paying both ordinary income tax (when transferred) and capital gain taxes (when sold) at a later date.
For example, you purchase $1,000 stock in IRA. When you transfer, it’s valued at $5,000. You pay ordinary income tax on $5,000 when transferred out of your IRA.
Let’s say in 5 years it’s now worth $10,000. When you sell, you pay capital gains tax on $5,000 ($10,000 sell less $5,000 basis). If you don’t correct the basis, you might make a mistake and pay capital gains taxes on $9,000 ($10,000 sell less incorrect basis of $1,000). Ouch. A common and costly mistake. You want that stepped up basis.
If I left the stock in my IRA and need to sell later, I would be paying ordinary income taxes on $10,000.
If you don’t need the cash, it may make sense to transfer stock from your IRA RMD that you think will appreciate in value (assuming capital gain taxes are lower than ordinary income taxes in the future).
AW
I did not say what I meant clearly. What I should have said is this.
2. If you have to take RMDs, your RMD and tax bill look to be lower in 2023 than this year’s.
I hope I said it right this time. Sorry for the confusion.
2. If you have to take RMDs, your RMD and tax bill look to be lower in 2023 than this year’s.
Agree. But another year of age will add to the RMD. Usually minor, but it starts accelerating in your latter (golden → platinum) years. Recent change in the table helps some.
PucksF:“2. If you have to take RMDs, your RMD and tax bill look to be lower in 2023 than this year’s.”
You’re guessing as to what the stock market and everyone’s portfolio will look like on Dec 31s of this year.
If you got that good a crystal ball, let me know! We could all profit handily from it…
t.
If you got that good a crystal ball, let me know! We could all profit handily from it…
Telegraph,
This is a brilliant economy with the FED tearing it down somewhat. There is an implosion happening in China economically that will wash up on our financials.
The market has fallen dramatically and has down side. No one is crying in the aisles yet. They will be.
If you have any ideas on why there would be a bull rally in US equities that is far more important to tell yourself or the rest of us.
If there is NO case for a bull argument…and there are a few cases for a bear argument…plus the trends…you have no need for a cliche like asking for a crystal ball.
