rmd for IRA and 403B

[Bucky]

If you have both IRA's and 403b can you take the entire RMD from just one IRA or do you treat the IRA's and 403b Separate?

Bucky

[Joe Btfsplk]

RMD and 403b

My wife rolled her 403b over to a Rollover IRA so that implies the same rules include both. I have two rollover IRAs and always take the total RMD from just one of them. I can't answer your question without researchin it. I think the combined total would be the basis of the RMD and you could draw it from either. However, you should read the instructions in the Tax Book or the IRS publication covering RMD.

[Joe Btfsplk]

Publications 575 and 590

Publications 575 and 590 cover RMD and pension and annuity income. RMD rules for annuities are not the same as for IRAs according to the Tax Book page 13-24. Nothing is said about 403b RMDs in the Tax Book as far as I can see. The IRS publications may have more to say about it.

[sea-tax]

If you have both IRA's and 403b can you take the entire RMD from just one IRA or do you treat the IRA's and 403b Separate?

Bucky

I think and am not sure because I usually rollover my clients 403b into an IRA upon retirement.
1) if client is retired then you take the total of all IRA's and I believe that includes a 403b which is basically an IRA.
2) if the client is 70.5 and still working where the 403b is setup then they don't have to take RMD from qualified plan until the client retires.

You may want to see reg section 1.401(a)(9)-5 and the pubs that the other poster talked about.

[Unregistered]

The required distributions must be taken separately - a RMD from IRA money & a RMD from 403(b) money. See A-9 in Reg §1.408-8

New York Enrolled Agent

[Bucky]

Thanks New York Enrolled Agent

I looked at that section and it does state "403b contracts or accounts will not satisfy the distribution requirements from IRA's nor will distributions from IRA's satisfy the requirements from section 403b contracts or accounts."

Not sure why it matters but with the 50% penalty it would be beyond stupid to do it any other way.

Bucky

[Joe Btfsplk]

Advise to the client

If the client is retired, then you should advise him/her to roll over the 403B to a rollover IRA, then the RMD problem would be less confusing and easier.
Also 403B plans are often in annuities. I they can be rolled over without penalty, then better , less costly investments would be available in the IRA.
For a cllient who is not familiar with investments, check Vanguard. They offer target retirement date funds and 'balanced' funds that have low expenses which would probalby outperform the 403B plan.

[sea-tax]

If the client is retired, then you should advise him/her to roll over the 403B to a rollover IRA, then the RMD problem would be less confusing and easier.
Also 403B plans are often in annuities. I they can be rolled over without penalty, then better , less costly investments would be available in the IRA.
For a cllient who is not familiar with investments, check Vanguard. They offer target retirement date funds and 'balanced' funds that have low expenses which would probalby outperform the 403B plan.

First of all not all 403b plans are annuties infact most are not. Most will have a choice between mutual fund or annuity and the client choose annuity.

Secondly for a client who is not familia with investments they should not check out Vanguard but rather go see a professional. Just as I would not recommend that a non tax savy person go use turbo tax. And always remember low cost =no advice.

[Joe Btfsplk]

Professional Investment advice

You have a lot more faith in professional investment advisors than I do.

The only professional advice worth the cost would be from a fee-based advisor who gets no commissions. However, many no-fee advisors do not give decent advise. They will often recommend the funds or stocks with the greatest recent upward momentum just as they are about to collapse.

But if you pick a S&P Index fund from Vanguard or a Vanguard Balanced fund or a Vanguard target retirement fund, you will outperform at least 75% of all funds and will do so at a minimum expense. It does not take a professional to select such a fund any more than someone with a 1040EZ needs to go to a professional tax preparer.

Even if the 403B is not an annuity, it is probably through a high-fee mutual fund with no better than average performance.

[sea-tax]

You have a lot more faith in professional investment advisors than I do.

The only professional advice worth the cost would be from a fee-based advisor who gets no commissions. However, many no-fee advisors do not give decent advise. They will often recommend the funds or stocks with the greatest recent upward momentum just as they are about to collapse.

But if you pick a S&P Index fund from Vanguard or a Vanguard Balanced fund or a Vanguard target retirement fund, you will outperform at least 75% of all funds and will do so at a minimum expense. It does not take a professional to select such a fund any more than someone with a 1040EZ needs to go to a professional tax preparer.

Even if the 403B is not an annuity, it is probably through a high-fee mutual fund with no better than average performance.

Joe,
I do have more faith because I am one of those professional investment advisors.
Also I am sorry that your view of my profession is so low. unfortunately you must have been burned by one of those scums in the past.
However I take exception to your generalization of investment pros. Just as I think any tax preparer would take exception if I said some disparging remarks about the level of advice given clients by H&R or JH preparers.
Furthermore you must compare apples to apples and your Vagaurd example is actually way off base. I could spout off multiple loaded funds that even when the load is included the client is still better off paying the load than going no-load. It all comes down to return versus expense.
Also I take it that you tell your clients that qualify for a 1040ez that they should just do it themselves rather than pay you, or you do it for free. Cause if not than you would be no better than those investmetns reps you talk so dirty about. Because we all know that they could save your charge and get the same product or end result right?

[Joe Btfsplk]

Loaded funds

You are correct in that some load funds outperform many no-load funds. However many studies prove that the majority of funds underperform the S&P.

In order for an advisor to pick a fund logically he would have to analzye all or most stocks in their portfolio and have knowledge of how much churning of the portfolio goes on, etc. So all you are left to use in judging it is past performance which is no guarantee of the future.

[sea-tax]

You are correct in that some load funds outperform many no-load funds. However many studies prove that the majority of funds underperform the S&P.

In order for an advisor to pick a fund logically he would have to analzye all or most stocks in their portfolio and have knowledge of how much churning of the portfolio goes on, etc. So all you are left to use in judging it is past performance which is no guarantee of the future.

What studies? And if a fund has a load or not makes no difference about its return versus the s&p. There are many no-loads that can't beat there bench mark.

obviously past performance is not indicative of future results , but past performance is important in making an investment choice-no?

Also you kind of glossed over my 1040ez annalogy.

The fact is that I have been fee-based and commissioned based and I do not think that just because one person is one or the other that this makes their advice more or less important.

[veritas]

I have had alot of clients who had no funds whatsoever and would not ever have any funds for retirement if investment advisors such as seatax and myself did not hold their hands at every step. So I think we should be paid for that. My only regret is I did not do it sooner.

[Unregistered]

I have had alot of clients who had no funds whatsoever and would not ever have any funds for retirement if investment advisors such as seatax and myself did not hold their hands at every step. So I think we should be paid for that. My only regret is I did not do it sooner.

Amen my brother from a different mother!

sea-tax

[Joe Btfsplk]

You may be right

There are many people who need someone to make their decisions for them. Following any kind of investment advice is better than throwing all your money away on wine, women and song.

The point that I was trying to make is that anyone who follows a simple strategy, allocating their money between the S&P index and a bond fund will outperform most load funds. That is a one-time decision that does not require a lot of expertise.

Psycologically, there are people who do not have the self-discipline to follow even the simplist plan and need hand-holding, and if they are willing to pay you for that service, then it is probably well-worth the extra expense to them.

Unfortunately, even the best investments have ups and downs. I have seen how people who receive lump-sum retirement benefits go to an 'investment expert' and put their money in a fund just before a bear market, then pull it out after the bottom drops out of the market, taking a big loss and blaming it on the advisor.

I do not generally provide any kind of investment advice to clients since there is always a bear market around the corner and I don't want to be blamed if my advice, even if it is excellent for the long run, causes them to invest just at the peak of a bull market.

Another reason I prefer not to give such advice is that I do not like hand-holding and believe people should make their own decisions. Not everyone can be their own CPA, lawyer, doctor or auto mechanic, but anyone willing to follow a very simple approach can manage their own investments by allocating funds between a broad market index and a bond fund, especially if they use dollar-cost averaging.

When I got my lump-sum retirement, I listened to a 'full-service' broker, but I soon found out that my best decisions were made by myself.

My all-time best investment was $ 3,000 invested in Correction Corp of America which I sold a few months later for $ 30,000 . When I sold it thru the full-service, full-price broker, I paid $ 400+/- commission. I did not buy this stock based on the broker's advice. I had talked to an employee of one of their prisons who told me how good the stock was doing and I believed crime was a growing industry.
But the stock had such a fantastic, swift run-up, I finally decided to put in a stop-loss at 15% below the then current price. Very soon after, the stock plummeted. My broker never called and advised me to buy or to sell.

Promptly therafter I switched my account to Charles Schwab. Later I switched to Brown which was recently taken over by E Trade. I have profited considerably by their lack of advice and low transaction fees.