If Not Now, When?
This is it, now! The best time to think about your RMD. The old year is gone. And by now you can easy get your tax-deferred account totals as of December 31. Just divide the total by the age-appropriate “Distribution Period” number, and there you have it, your required RMD amount.
Clarity and Changes
With the SECURE Act passed Congress and signed into law, the first RMDs now start at age 72, rather than the previous 70-1/2. However, if one had previously begun taking RMDs, then, as I understand it, one continues RMDs as on the original start-at-70-1/2 plan.
As of this writing, the IRS has not updated the “IRA Required Minimum Distribution Worksheet” but I expect a new version will be produced sometime this year.
An in-depth post on RMD is here: “Are You Ready? Required Minimum Distribution Follies (Part 1)“. Originally I had considered taking one’s RMD in monthly increments over a year. But I changed my opinion and now I suggest taking it in a lump sum in January. My change in recommendation to when one might best take one’s RMD is here: “RMD Recommendation Change“.
As For Myself
In fact, that is what I now do. On January 1 or shortly thereafter, I get the totals of tax-deferred accounts (not including Roth), calculate the amount as specified in the IRS worksheet, and arrange to withdraw that amount.
Some Discipline Required
Yes, I need to do some actions myself. Fist and foremost, I need to remember to deal with the RMDs. The downside of forgetting is onerous, given the IRS penalty for not taking enough RMD funds. And there is the gathering up of the account totals, and calculating the RMD amount, and then determining which accounts to redeem from. Those are the mechanical aspects of taking RMDs. The bigger challenge is to allocate the funds properly once I have them.
Day To Day
I do not feel in danger of misappropriating my withdrawn money. I reflect on the discipline of how I came to have tax-deferred accounts: I signed up for 401k participation when I started in whatever company I was working for. I contributed to these accounts. I rolled over my 401k money into IRAs whenever I changed jobs. It was a multi-year process. I contributed from every paycheck. And I treated it like any another obligation. It added up.
Don’t Spend It All At Once
That is the main focus: receiving a largish sum at one time means I need to be prudent. It needs to last all year. And yet, I do not feel “lucky.” I do not feel like I won the lottery. (And even if I did, it would be similar, I hope.) Money is money, it sits in the bank, and I use it to live. It is not there to make me happy or to make me anything. Money is a tool, don’t hurt oneself.
How do you handle the psychological and emotional side of receiving your RMD funds? Comment here.
The illustration show is from “Poissons, Ecrevisses et Crabes.” Originally published in 1719, with a second edition in 1754, it can lay claim to being the earliest known publication in color on fish — in this case, celebrating those hailing from the waters of the East Indies. This wonderful book is the creation of Louis Renard (publisher, bookseller, and spy for the British Crown, employed by Queen Anne, George I and George II). In two volumes, the book contains 100 plates bearing 460 hand-colored engravings — a total of 415 fishes, 41 crustaceans, two stick insects, a dugong and, in a final foldout, a solitary mermaid. The engravings were supposedly based on drawings from life by the artist Samuel Fallours (active 1703–20) which belonged to Baltazar Coyett, Governor of Ambon and Banda (1694–1706), and to Mr Van der Stael, Governor of the Molucca Islands. There is no main text as such, only that found in and around the images, which tends to be anecdotal, mainly focusing on recipes as opposed to science.
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