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.”
Your RMD for next year will be determined by balance at end of 2022.
Your RMD for this year is based upon value at end of last year, which was near market top. You don’t have a choice. Your RMD is fixed. If you waited till now to start taking it out - ouch! or you could wait till December but who knows what it will be?
Some take their RMD money out of stocks and put in MMF Jan 2 for the year. Others waited till Dec - expecting the market to rise rise rise like the past few years being up 11% from Jan. Others sold a few times a year to get the RMD payments.
Your RMD for next year is not yet determined.
Your tax bill for THIS year is already determined. Your RMD withdrawal amount was determined last December.
You got to take it no matter what the current market is. If you wait and the market is down 50% in December, you still got to take it out in calendar year 2022.
t.
2. If you have to take RMDs, your RMD and tax bill look to be lower this year than last year.
Why? Isn’t the dollar amount of an RMD set based on balance end of the prior year, so 12/31/2021? If the down market continues, it will be 2023’s RMD that is lower.
Do I have that wrong? I only do RMDs on an inherited IRA and it’s pretty negligible, so I largely ignore it.
IP
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 this year than last year.
Close - but unless the balance in the account(s) subject to RMDs was lower on Dec 31, 2021 than it was on Dec 31, 2020, your RMDs for 2022 will likely be larger than RMDs for 2021. If you do have smaller RMDs even though your balances were similar or even larger at the end of 2021 than at the end of 2020, it’s because the RMD table, which dictates the percentage that must be distributed, was changed for 2022 to reflect longer life expectancies since 2002 - the last time the table was changed. That said, the COVID pandemic has actually decreased life expectancies - so it will be interesting to see what happens the next time the IRS reviews the table. (It is now required that the IRS review the table at least every 10 year based on an executive order that was signed in 2018.)
If your account balances stay down for the rest of 2022, that decrease, plus having to take out the larger RMD in 2022 will mean that your RMDs in 2023 will likely be lower than the 2022 RMDs.
AJ
The assumption was that the balance would be lower on 12/31/22 than it was on 12/31/21.
1. 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.
2. 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.
#1 is 100% correct…if you are still investing. Buying “on sale” over three decades juiced my returns above what the overall market returned–not because of “investing smarts,” but because of math. You buy more shares at the lows than at the highs. Unfortunately, if you are living off your money as a retiree, this works in reverse. You draw the money out to live on, and no longer have it in your possession when the market goes back up.
#2 sounds like a rationalization–“I’m paying less taxes because I’m making less money!”
I’ll add one:
3. If you want to do a partial Roth conversion, you can convert some funds at current prices which are lower…so either convert more shares for the same tax bill, or convert the same shares you were thinking about in December 2021 but have a lower tax bill. (Hopefully, you will not have to sell assets that are way down to cover the extra taxes on the conversion.)
PF:"What I should have said is this.
I hope I said it right this time."
Unless you have an excellent crystal ball, you have zero clue as to what the market will be in Dec 2022…that that determines what your RMD will be next year…
In my case…my IRA is 50% stocks…so I’m really not sweating it. I’m down a few percent for the year - after taking 5 months of withdrawals…
I have no clue what it will be on Dec 31.
t.
You’re right on 1 and 2. #3 is a good one.
I’ll add one:
3. If you want to do a partial Roth conversion, you can convert some funds at current prices which are lower…so either convert more shares for the same tax bill, or convert the same shares you were thinking about in December 2021 but have a lower tax bill.
I followed my own logic and did an additional partial conversion earlier this week. There were no taxes withheld, so that’ll catch up later. Interestingly, while I was checking the account to verify the conversion was made, I saw that several funds hit me with very large dividend payments…in the amount that will cover the taxes on the Roth conversion. Probably so much in dividends arrived because it’s the end of the quarter. The dividends were swept into the cash fund, which is convenient for my last two IRA withdrawals for the year to have more withheld to cover the conversion (plus money withdrawn to pay the taxes on the conversion).
I’m trying to get in more Roth conversions this year because it’s the last year I don’t have to worry about IRMAA.
I’m trying to get in more Roth conversions this year because it’s the last year I don’t have to worry about IRMAA.
When doing conversions, don’t forget that those conversions can push you over the NIIT limits ($125k for MFS, $200k for Single/HOH, $250k for MFJ), and subject your net investment income to a 3.8% surcharge.
AJ