In addition to blue bayou’s response, I believe you can have your RMDs automated to pay out monthly also, once you reach that age, assuming you want/need the RMDs for cash flow.
Alternatively, and only if you don’t need to RMDs for living expenses…
If you do not want to deal with filing quarterly estimated taxes AND if your RMD covers your total tax liability, you can have the RMD paid directly to the IRS. Payments made via RMD are treated as if they have been paid throughout the year, even if you wait until Dec 28th, keeping you within Safe Harbor, as long as the end of year payment satisfies your total liability.
I don’t think that works with state tax obligations, but am uncertain.
And if you don’t need them for living expenses, the RMD can just be automatically transferred to your brokerage MMF or other investment vehicle. (In addition to paying estimated taxes as noted by CT.)
Thanks all. This stuff is all so over my head. I really need a “finance for dummies” course. We have more than enough for retirement, but my DH handles all the investment and tax stuff. My big worry is if something happens to him. The second issue is my comfort level with the cashflow. He’ll get his (small) pension kicking in next year, but when he retires I’d feel a bit better since I handle billpay, with some cashflow besides my ss and that pension.
Agreed. I’ve been contemplating doing that for two years now, and am finally comfortable that I have all the inputs correct in my spreadsheet so I’ll try it this year. (My last Roth conversion will go to pay taxes…)
It sounds like he’s getting too detailed. Maybe the best thing he can do for you is write it down on a piece of paper. For example, this is the account logon info for Vanguard/Fidelity/whatever, this is how much you/I/or we have in that account. Do that for every account. Then you can log into the account and take a look on your own time with a cup of coffee (or glass of wine). You don’t have to understand everything that is in each account, but it would be good to take a look and see hey, these are stocks, mutual funds, whatever.
If, God forbid, something happens to him, you could have a trusted and informed child or friend go through each account and figure out what to do with the contents. I helped my mom sort out her accounts three years ago. I really wish I would have done it sooner. She had a large amount of money in one checking account earning virtually nothing, so I diversified it into different accounts, safe money markets earning over 5%. She still doesn’t understand much, but I show her every month, look, now you are earning 5K/month in dividends, and you used to be earning $5. Even she understands that!
I just finished a Fidelity webinar on estate planning and one of the advisors mentioned that lots of people don’t have enough free cash on hand for their beneficiaries to pay for expenses before the will/trust pay out and some checking accounts may be frozen at death.
I was looking at the schwab account today, and he told me (if I understand correctly) that each account has a cash and money market component!! Yikes!! Maybe he meant the vanguard account and the t rowe price account, etc. I reminded him that we are overdue for going over this stuff for the umpteenth time, but apparently dotay was a hectic work day and he was a bit non-plussed about my idea of looking at it together tonight!
I am less familiar with Schwab, even though I have an account there, but I can tell you what happens with Fidelity.
If dividends are not reinvested, they are deposited into a sweep account. (I think it’s called core maybe?) The account holder can designate which core account she wants. This core account does not pay quite as high a return as some of Fid’s MM accounts, but fairly close.
While this is not cash per se, it almost functions as cash. You can sell it easily to convert to cash, or you can use it to buy other securities.
I transfer $ from Fid to my bank checking account and do not need to sell the MM prior to doing that. When taking my RMD from Schwab at year end, I do need to sell the MM to cash a day before taking the RMD. I do not know if this difference is a Fid-Schwab difference or b/c I am taking an RMD as opposed to transferring $ to my checking account.
I dread the day my husband will have to take RMDs. Because according to the posts here, this is apparently not a simple click and done procedure. Which means I will have to prod him until he does this! Ditto Social Security. Nightmare scenario!!!
RMD’s can be click and done at most places. For example, Vanguard will calculate the amount of RMDs from all of the accounts that you hold with it. You can take some RMD dollars from each retirement account or the total RMD for the year out of one account.
Then just tell Vanguard how often you want the money (mostly, quarterly, 6 installments, 3?) and when and where to send the money.
@jym626, during ShawWife’s childhood, her parents often fought about money even though they were pretty well-to-do. So, she was so anxious about money that when I first tried to talk with her about our money, she couldn’t stay seated at the table. If I were to die or have a stroke, she would have no idea where things were or what to do. So, I found a very capable female financial advisor and we began using her firm. It turned out that a younger FA at the firm (male) was terrific at explaining stuff to my wife, so she is much more comfortable now. I do tell her when I am making a meaningful new investment, but she does not necessarily care about the details.
In our household, she handles the visible (material things, repairs, food (mostly),most of the aspects of life, etc.) and I handle the invisible (taxes, bills, insurance, investments, planning, travel, networks, hardware and software, etc.). So I thought about how I would ensure a transition for ShawWife in case something happened to me.
I set things up so ShawWife will be able to talk to a) my assistant who knows where the accounts are and what is in them; b) the FA who also knows what is where but also could give her good advice about what to do; c) the accountant who handles my personal and business taxes; and d) our lawyer (who is married to one of her good friends). I was very conscious about sharing enough information with each so that they have a good sense of the big picture. She is comfortable with three out of four – she has only met the accountant once but she liked his straightforwardness.
I wonder if you could set something up like this with at least one competent professional (who is hopefully younger than you and your husband).
Thanks, but it will have to be my husband who has to manage that. That I’m not looking forward to! The “competent individual” will be me. My husband is quite competent financially (his trading IRA is doing well), it is just governmental bureaucracy he has absolutely zero interest in dealing with. I handle all of that stuff like taxes and licenses so I dread the day I have to deal with more of it.
Our CFP guided us very well with this for me at our meeting last week (the RMD part). Really, it wasn’t hard. Social Security is not hard to apply for.
There are 2 insu payout accounts from my dad (neither has a big amount in them by my standards) but one is earning only around 3% and the other maybe 3.25%. He wants me to close those and move them to something that might earn closer to 5%. Any thoughts/suggestions? My online banking is currently earning around 4.3%. Thats an easy shift. Anything better thats easily accessible if I want the cashflow?
Do you have non-qualified long term capital gain assets? Are you in a higher tax bracket than they are? Have you thought about gifting shares and not after tax cash that they could sell and would incur less taxes than you?
This is not meant to be advice but things to consider. Consult your own tax and financial professional.
Yes, in a higher tax bracket than they are so have been gifting them shares. One in grad school falls below the income level for cap gains, so really beneficial for her.
I think you said upthread that you have an account at Schwab?
If so, their MM SWVXX is paying 5.16%, but that rate floats with interest rates.
If you live in a state with income tax, you could consider a Treasury, but first confirm that your state does not tax Treasuries. You would need to decide the duration, with respect to how soon you will need the money. Having said that, Treasuries are easy to sell prior to maturity if you needed the funds sooner than anticipated.
Here is a chart of current yields by duration.
If you want to learn how to use and interpret your account, you can call the 800# and the very helpful reps will walk you through the process of buying and selling MM, Treasuries or anything.
I almost never call Schwab, but have called Fidelity a number of times as I familiarized myself with their platform, and the reps were exceedingly patient and helpful.
Thanks. I don’t want to tie up the money in treasury bonds (if thats what you mean) since I was thinking it would be the "cashflow " account if needed. I’ll look at what schwab has and then figure out if I can navigate their site. DH is crabby today (challenging work week) so will not put this on the plate for tonight.
He did say we have a schwab MM account spread across 4 different accounts there. So I need to understand how that works.
The “competent individual” will be me. My husband is quite competent financially (his trading IRA is doing well), it is just governmental bureaucracy he has absolutely zero interest in dealing with. I handle all of that stuff like taxes and licenses so I dread the day I have to deal with more of it.