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Clock Running Out on 2021 RMDs

Category: Financial and taxes in retirement

December 24, 2021 — The clock is running out for people who must take their yearly Required Minimum Distributions (RMDs) from their 401(k) or IRA plans. An RMD is the minimum amount you must withdraw from your account each year after you reach a certain age. December 31 is the deadline.

You generally have to start taking withdrawals from your IRA, SEP IRA, SIMPLE IRA, or retirement plan account when you reach age 72 (70 ½ if you reach 70 ½ before January 1, 2020). The deadline is April 1 of the year following the calendar year in which you reach age 72, if you were born  after Jun 30, 1949. Thereafter the deadline is Dec. 31.

Calculating your RMD

There are various IRS tables that tell you how much your RMD has to be (you can take out more if you want). The amount you take out is taxable in full. As an example, if you are 72 years of age the factor is 25.6. You divide your IRA/401(k) balance by the distribution period in the IRS Uniform Lifetime table to determine the RMD. So if your balance was $1 million, dividing by 25.6 would yield an RMD of $39,062.50. Each year as you age the factor increases, until at age 115 or older it is 1.9. The Uniform Lifetime table distribution periods are being revised to reflect current life expectancies, with new figures expected in 2022. Roth IRAs do not require withdrawals until after the death of the owner.

There is a far easier way to know your RMD, however. Your mutual fund company or broker will normally tell you how much you need to take out each year, as well as send out reminders to do so. If your IRAs are with more than one company it is up to you to make sure your total RMD reflects balances in all of your accounts. As a reminder, if you send money directly to a qualified charity that amount does not count as income (but you cannot deduct it).

If you haven’t taken yours yet – hurry!

The penalties for not taking RMDs are serious – 50% of the required distribution. It can take time to set up a withdrawal, so get on it today!

Posted by Admin on December 24th, 2021

7 Comments »

  1. We are considering a move to Fisher investments. Anyone have any opinions or experience with them? Not strictly an RMD only question, yet it will apply. Thank you

    by Caps — December 28, 2021

  2. With Fisher Investments, as with any financial/investment adviser, it’s important to check the fees and compare one adviser to another in terms of cost. Fisher generally charges at least 1 percent of the value of your assets in investment management fees each year. Vanguard Personal Advisor Services (which includes a dedicated personal adviser), for example, charges 3/10 of one percent of assets annually, a significant savings from 1.00+ percent, especially over many years. An hourly fee-for-services advisor can be even less, depending on how much assistance you need annually. My assets are held at Vanguard and TIAA and I generally manage them on my own, therefore I pay no investment management fees. However, I do pay a fee-for-services independent financial/investment adviser for additional advice on an hourly basis. I usually use this service for five hours or less each year, at $240 per hour.

    by Clyde — December 29, 2021

  3. I recommend this article from a couple of years ago, “Should You Hire a Financial Advisor or Do it Yourself (Beware those free dinners!)“. There is some pretty good advice on the pros and cons there.

    We see the ads for Fisher Investments all the time (even on this site from Google). Have heard mixed reports, which you will also see if search on “Is Fisher Investments a good company” on the Internet. Some people love them, others don’t. It is not easy picking a financial advisor, but somebody has to watching your investments. You can’t abdicate that responsibility. Good luck!

    by John Brady — December 29, 2021

  4. Good comments. Thank you Clyde and John. From Fisher ads, I got the impression that they were paid based on how much my account grew. We pay .75% now, invested in half stocks and half alternatives for the last 3 years, but it just hasn’t grown like I had expected.

    by Caps — December 30, 2021

  5. My investments are with Vanguard and they charge 3/10 percent for the investments that they are managing. They do not charge anything for money market or other assets that they do not manage. I have a personal Advisor that I have a conference call with quarterly and I can call him at anytime I have a question or need advice. I have been extremely pleased with the service I receive.

    by Mary — December 30, 2021

  6. I agree with Clyde. Another thing about Fisher is that their minimum investment level is (or used to be) $500K. $5k a year minimum is a lot of fee.

    Like Clyde, we also use Vanguard. If you invest at the Fisher minimum level (or you and a spouse combined), you qualify for funds with even lower fees (our average fees are less than .002% — depends on the funds you choose). In addition, at that level Vanguard will provide free consultation to get you started and on request if desired. Also we have never had to pay a transaction fee.

    Over the past 18 years since retirement I have tracked Vanguard investments versus my former excellent 401K. Very satisfied. Despite MRD, our base continues to grow so far.

    by RichPB — December 30, 2021

  7. After hearing, over the years, of Financial “advisors” taking off with investor’s money and other “too big to fail” stories, we have split our investments between TWO firms. Our Thrivent dollars have grown slowly but steadily and conservatively all these years while our Prudential accounts have done a little better. I always felt that if one went under, at least we would have not lost everything! We have paid no fees outright but I’m sure they are built in somehow. I have no problem paying someone a reasonable amount for their expertise – they are better trained than I. As we have moved a lot over the years, we have had to work with different adivsors – some better than others. Now in Maine, we still work with our Thrivent Rep. in Chattanooga but moved our Prudential accounts to a local Rep. here. I keep tabs of our $$ on a spreadsheet so everyone (especially us) knows what is going on.

    by HEF — December 31, 2021

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