Cash Distribution From IRA

[NipponManju]

I am filling out the paperwork for a distribution from my traditional IRA. The options are...

1) "One time partial distribution of cash....(Note: Funds must be available in cash)

and...

2) "One time partial distribution of securities.....(Note: Securities cannot be mailed to you.)

The cash amount I want is greater than what I have in the cash category of the IRA so I want to cash in the amount required from the S & P stocks portion of the IRA. Do I just fill in the cash amount on choice #2 and will they cash in the amount of stock required and send me a check? That's what I want to do but I don't know what they mean by "Securities cannot be mailed to you"?

Thanks all.

 

[alevin]

hi manju, does your traditional IRA have a contact phone number for you to talk to someone there about your account and how choice #2 would actually work? might get better information that way. people here would be guessing-unless they have trad ira with same group and have done what you are asking about...One of these years I'll be pulling from my small trad ira also, but not yet, so I haven't tried to figure that part out yet for myself.

 

[Stoplight]

Hi, NM !

What Alevin said ! Your custodian of your IRA is the one to ask...

I ASSUME you'd have to initiate a sell order of whatever stock you want to liquidate, so that your cash balance available in the IRA would meet the amount you wish to withdraw...and I ASSUME you'd need to wait for that sale to settle, as well.

I haven't withdrawn from my IRA yet, either, but I'm getting ready to, so please post your experiences and what you learn ! Thanks !


Stoplight...

 

[NipponManju]

hi manju, does your traditional IRA have a contact phone number for you to talk to someone there about your account and how choice #2 would actually work? might get better information that way. people here would be guessing-unless they have trad ira with same group and have done what you are asking about...One of these years I'll be pulling from my small trad ira also, but not yet, so I haven't tried to figure that part out yet for myself.

Yes I could speak to them about it but I don't want to listen to him try to talk me out of it - LOL

 

[NipponManju]

Hi, NM !

What Alevin said ! Your custodian of your IRA is the one to ask...

I ASSUME you'd have to initiate a sell order of whatever stock you want to liquidate, so that your cash balance available in the IRA would meet the amount you wish to withdraw...and I ASSUME you'd need to wait for that sale to settle, as well.

I haven't withdrawn from my IRA yet, either, but I'm getting ready to, so please post your experiences and what you learn ! Thanks !


Stoplight...

Let's say I was 70 (I'm not yet) and was forced to start taking distributions from the IRA. How do you do that? How do the stocks/bonds become cash?

 

[Stoplight]

Let's say I was 70 (I'm not yet) and was forced to start taking distributions from the IRA. How do you do that? How do the stocks/bonds become cash?

NM,

First of all...I'm not a Fed HR person, an accountant, a lawyer, a financial planner, an investment guru, or a tax advisor !!! I'm just a retired Fed schmoo like many of us here !!! Feel free to ignore everything I say !!!

I understand your reluctance to listen to your custodian's pitch for some other option, other than withdrawal...but geez....don't forget...It's YOUR money, not theirs !!! Do you have a financial planner, or a tax advisor ? Ask them !!! :smile:

I went through that when we rolled the Wife's 403(b) over to her IRA...just hang tough, and make it clear...you know what you're doing...escalate it up the organization, if you have to...

I have no answer for your question about RMD's, and stocks/bonds becoming cash. I thought you had to have a cash balance in the IRA equal to the amount withdrawn, but just for grins, I went in to my USAA Traditional IRA account and "applied" for a cash withdrawal...very simple...asked me how much, where is it going (account), and what tax withholding I wanted on it (minimum of 10% Fed). When I plugged in a one-time amount that exceeded my available cash balance, it didn't even hiccup. The next step was "Submit", but I didn't want to actually DO that, so I cancelled out ! Perhaps it would've flagged it, and given me options on what to sell, but I'm not going there, for this theoretical exercise ! Perhaps an equal weight across all holdings ? Don't know...

I also don't understand why people get riled up by the RMD, either...face it...Uncle Sam is gonna get their cut, either from you, or your heirs, eventually ! :smile: Me ? I have no Kids, and I'm not worried about the tax effect on those who benefit from my "good will", when I croak...let THEM figure it out, IF there is anything left !!!

Have you ever actually run your RMD numbers ? Check out the IRS worksheet :

https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf

Now, if I understand this correctly, my RMD has to be spread out equally over 27 years !!! That means my IRA has to be fully withdrawn at age 97 !!! I don't know about you, but if I make it to age 80, I'll be happy !!! Somebody/anybody can chime in here, and point out the errors of my ways !!! :smile:


Best wishes to you !!!


Stoplight...

 

[alevin]

I discovered that RMD worksheet myself recently, started working it into my calculations for needed cashflow will come from post-70, especially after working in assumption that social security is likely to cut payouts to something like 75-80% as of about 2034. good job pointing manju to the irs website, stop. :smile:

 

[NipponManju]

NM,

First of all...I'm not a Fed HR person, an accountant, a lawyer, a financial planner, an investment guru, or a tax advisor !!! I'm just a retired Fed schmoo like many of us here !!! Feel free to ignore everything I say !!!

I understand your reluctance to listen to your custodian's pitch for some other option, other than withdrawal...but geez....don't forget...It's YOUR money, not theirs !!! Do you have a financial planner, or a tax advisor ? Ask them !!! :smile:

I went through that when we rolled the Wife's 403(b) over to her IRA...just hang tough, and make it clear...you know what you're doing...escalate it up the organization, if you have to...

I have no answer for your question about RMD's, and stocks/bonds becoming cash. I thought you had to have a cash balance in the IRA equal to the amount withdrawn, but just for grins, I went in to my USAA Traditional IRA account and "applied" for a cash withdrawal...very simple...asked me how much, where is it going (account), and what tax withholding I wanted on it (minimum of 10% Fed). When I plugged in a one-time amount that exceeded my available cash balance, it didn't even hiccup. The next step was "Submit", but I didn't want to actually DO that, so I cancelled out ! Perhaps it would've flagged it, and given me options on what to sell, but I'm not going there, for this theoretical exercise ! Perhaps an equal weight across all holdings ? Don't know...

I also don't understand why people get riled up by the RMD, either...face it...Uncle Sam is gonna get their cut, either from you, or your heirs, eventually ! :smile: Me ? I have no Kids, and I'm not worried about the tax effect on those who benefit from my "good will", when I croak...let THEM figure it out, IF there is anything left !!!

Have you ever actually run your RMD numbers ? Check out the IRS worksheet :

https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf

Now, if I understand this correctly, my RMD has to be spread out equally over 27 years !!! That means my IRA has to be fully withdrawn at age 97 !!! I don't know about you, but if I make it to age 80, I'll be happy !!! Somebody/anybody can chime in here, and point out the errors of my ways !!! :smile:

I have to check with my acct. but I may be able to take a few thousand out of the IRA per year and not pay tax, because I have no other taxable income and the write-off for filing is $8000. If so, that's like making a guaranteed 20% on whatever I withdraw because that's the tax I won't have to pay. Problem is I can't take it all at once. I don't have a lot of faith in ultimately making money in the portfolio so 20% to me is a lot better deal.

 

[evilanne]

Let's say I was 70 (I'm not yet) and was forced to start taking distributions from the IRA. How do you do that? How do the stocks/bonds become cash?

Once you calculation the Required Minimum Distribution (RMD) using the worksheet or IRS Publication and know how much you are required to withdraw, it depends on what you are invested in. If you have specific bonds or preferred stocks, they generate periodic payments that will pay out cash periodically. Stocks, bond funds and mutual funds, depending on the investments may or may not generate dividends & capital gains that can be reinvested or paid in cash. Most brokerage accounts have a function to show you estimated quarterly earnings. If you currently reinvest dividends, you can change some or all to pay out in cash to cover the RMD. If you don't have enough cash to cover the RMD, you will have to sell assets to cover the difference and pay associated fee(s). It really depends on where your money is invested. TSP's Retirement Income Calculator https://www.tsp.gov/PlanningTools/Calculators/retirementCalculator.html actually uses the IRS tables for calculations based on your assumptions (Table III if you are single kicks in at 70.5 and is lower than life expectancy calculation). As long as you are taking out more than the minimum there isn't any tax issue. If you have a full service brokerage account your financial advisor should keep you straight.

 

[NipponManju]

Once you calculation the Required Minimum Distribution (RMD) using the worksheet or IRS Publication and know how much you are required to withdraw, it depends on what you are invested in. If you have specific bonds or preferred stocks, they generate periodic payments that will pay out cash periodically. Stocks, bond funds and mutual funds, depending on the investments may or may not generate dividends & capital gains that can be reinvested or paid in cash. Most brokerage accounts have a function to show you estimated quarterly earnings. If you currently reinvest dividends, you can change some or all to pay out in cash to cover the RMD. If you don't have enough cash to cover the RMD, you will have to sell assets to cover the difference and pay associated fee(s). It really depends on where your money is invested. TSP's Retirement Income Calculator https://www.tsp.gov/PlanningTools/Calculators/retirementCalculator.html actually uses the IRS tables for calculations based on your assumptions (Table III if you are single kicks in at 70.5 and is lower than life expectancy calculation). As long as you are taking out more than the minimum there isn't any tax issue. If you have a full service brokerage account your financial advisor should keep you straight.

Here is the option for distribution on the form I am trying to understand the mechanics of...

"One-time partial distribution of securities....(Note: Securities cannot be mailed to you.)

If the securities (stocks/bonds) cannot be mailed to me, I assume they are saying that the percentage of the security I choose for distribution will be sold for cash and that cash (check) will be sent to me? Otherwise, they'd be telling me that I can't turn any stocks or bonds into cash for distribution to myself? Basically they'd be telling me I can't get any money out which can't be right?

 

[Warrenlm]

...., but if I make it to age 80, I'll be happy !!! Somebody/anybody can chime in here, and point out the errors of my ways !!! :smile:


Stoplight...

Just a note here. This goalpost will move, considerably, when you get to 75.

 

[evilanne]

Here is the option for distribution on the form I am trying to understand the mechanics of...

"One-time partial distribution of securities....(Note: Securities cannot be mailed to you.)

If the securities (stocks/bonds) cannot be mailed to me, I assume they are saying that the percentage of the security I choose for distribution will be sold for cash and that cash (check) will be sent to me? Otherwise, they'd be telling me that I can't turn any stocks or bonds into cash for distribution to myself? Basically they'd be telling me I can't get any money out which can't be right?

I'd call before making that assumption. If you are correct and you have 5 different stocks/funds, would they take is proportionally like TSP? That would be 5 sales orders. You indicated you wanted out of the S&P portion of your IRA, does it give you a choice of what they would convert? IMO, the best bet is to make decision of which assets you want to sell and make sure the proper amount of cash is available before you withdraw it.
If you have a regular brokerage account, it would be possible to take the distribution "in kind" e.g. you could transfer 10 shares @ $50 or $500 worth of stock from IRA to regular account, which would be revalued at the current price (new purchase price) and would be considered income even though you don't get any cash. I'm considering converting part of my IRA to Roth, when they transfer it from one account to the other, they would transfer securities at current price and I would have to pay taxes on that amount as if it were income; they would not sell the shares and then repurchase (which is good since there is no transaction fee, just taxes).

 

[Stoplight]

Just a note here. This goalpost will move, considerably, when you get to 75.

Ya know, Warren ? I never even looked at that !!! I ASSUMED once you calculated your RMD, that was the amount set for life. I never thought about having to do the calc, every single year ! Hmmmmmm.....more research...

Thanks for the head's up !


Stoplight...

 

[GUCHI]

I just recently went with the advice of my financial planner and pulled all my tsp (in processing now) to put into IRA 72T. He has ways of my money growing and I can use it at the same time. I have not seen the money yet but he is good in what he does and I have a lot of faith in him. I was tired of watch n and fret over the market so I put it all in his hands. Stocks,TSP and possible life insurance. Time will tell, stay tuned

 

[GUCHI]

Went on line Friday to check status of tsp withdraw and saw where process has been halted and letter coming in mail, ut ohhhhh I wonder what happened?

 

[Stoplight]

Went on line Friday to check status of tsp withdraw and saw where process has been halted and letter coming in mail, ut ohhhhh I wonder what happened?

Guchi,

Just my 2 cents, based on personal experience : CALL TSP IMMEDIATELY !!! DO NOT wait for letter !!! Find out what's going on !

I faxed in my request for a rollover, but they didn't get one page...thus, they were processing it as a full TSP distribution, in cash, to me...with all the tax consequences !!!

Just my humble opinion...


Stoplight...

 

[userque]

Also, they've probably uploaded the document whereby you can access it via the Correspondence? section of your online TSP account.

 

[GUCHI]

I just so happened to call them today, simple fix and I will refax tomorrow. We will see.... But also I have been think n maybe waiting could benefit me, in the short short run.

 

[evilanne]

Ya know, Warren ? I never even looked at that !!! I ASSUMED once you calculated your RMD, that was the amount set for life. I never thought about having to do the calc, every single year ! Hmmmmmm.....more research...

Stoplight,
With typical 72T based on life expectancy used by TSP (there are some alternate methods with IRA) and Required Minimum Distributions (RMDs) at age 70.5, the amount changes each year based ending balance (12/31/XX) divided by the factor. The factors are different based on the table based on age. Tables are different for 72T and RMDs.
An inherited IRA using stretch method, is calculated in similar manner, EOY balance divided by factor. The factor is established year after death based on individual's age, with it reduced by 1 each subsequent year.

Publication 590-B (2015), Distributions from Individual Retirement Arrangements (IRAs) (Tables in Appendix)
https://www.irs.gov/pub/irs-pdf/p590b.pdf or https://www.irs.gov/publications/p590b/index.html
Which Table Do You Use To Determine Your Required Minimum Distribution? https://www.irs.gov/publications/p590b/ch01.html#en_US_2015_publink1000230772

 

[Stoplight]

Stoplight,
With typical 72T based on life expectancy used by TSP (there are some alternate methods with IRA) and Required Minimum Distributions (RMDs) at age 70.5, the amount changes each year based ending balance (12/31/XX) divided by the factor. The factors are different based on the table based on age. Tables are different for 72T and RMDs.
An inherited IRA using stretch method, is calculated in similar manner, EOY balance divided by factor. The factor is established year after death based on individual's age, with it reduced by 1 each subsequent year.

Publication 590-B (2015), Distributions from Individual Retirement Arrangements (IRAs) (Tables in Appendix)
https://www.irs.gov/pub/irs-pdf/p590b.pdf or https://www.irs.gov/publications/p590b/index.html
Which Table Do You Use To Determine Your Required Minimum Distribution? https://www.irs.gov/publications/p590b/ch01.html#en_US_2015_publink1000230772

Evil,

Thanks for all the info !!! I don't plan on sitting on my IRA until the RMD becomes an issue...but all y'all have given me some food for thought !!!

I retired as "normal" FERS, with the SS "supplement"...that goes away next year, so it becomes a number crunching issue between taking SS at age 62, or taking withdrawals from our IRAs....

Good stuff !!! Each person's "situation" is different !!!


Stoplight...