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As much as I hoped to avoid RMD's through many years of aggressive Roth conversions, I failed. I arrives at RMD age and still have a balance in my TIRA and I must take an RMD. So my question has to do with taking the RMD on Vanguards website.

I know my RMD amount, so I logged onto Vanguard to transfer that amount from my TIRA to my taxable account. Easy enough, I have made lots of transfers over the years. So I went through the screens and when I got to end, and was presented with click here to commit. I did NOT commit. Why?

Vanguard did not offer me the opportunity to designate this as my RMD. SO how does Uncle Sugar know I satisfied the RMD? Are any of you Vanguard customers who have already navigated the RMD process. I would send a question to VNG but their web site doesn't offer that, of course but that is another problem.

I'm guessing anything you take out of your TIRA will count as your RMD until you satisfy it. No need to tell Vanguard that.

I'm guessing anything you take out of your TIRA will count as your RMD until you satisfy it. No need to tell Vanguard that. - zoro.

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That make sense. I was trying to make it more complicated

You have to keep track of your own RMDs. The brokers (you do have IRA accounts at multiple brokers, right?) don't know your withdrawal situation, they just report your total withdrawals to the IRS.

You have to keep track of your own RMDs. The brokers (you do have IRA accounts at multiple brokers, right?) don't know your withdrawal situation, they just report your total withdrawals to the IRS. - rayvt

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Thanks Yay. You and zoro got me understand it really is simpler than I was trying to make it. My plan for years and years had been to drain the TIRA before the RMD's arrived so I never paid much attention to the process.

Vanguard did not offer me the opportunity to designate this as my RMD. SO how does Uncle Sugar know I satisfied the RMD?

I got the same thing on my first RMD when I was with TDA, so I asked TDA. The answer I got back in short order (TDA's customer service was excellent, both in timeliness and accuracy and cogency) was that they can't really say whether my withdrawal satisfied my RMD requirement because they don't know what other IRAs I might have with other brokers, and those IRAs contribute to my total RMD for any year. The withdrawal would be reflected on the 1099 TDA sends out for the tax year, and that 1099-reported withdrawal can be used to satisfy the IRS--which knows what my RMD is because they know what I have in all my TIRA accounts.

Sure enough, that happened with my 1099 for that year (and subsequent years), and the IRS has been satisfied each year.

TDA also had no problem tracking my IRA withdrawals from them and telling me how much RMD I had left to withdraw from my account with them (tacitly assuming that account was my only account). So far, it's that way with Schwab, too.

I suspect your situation with V'guard and mine with erstwhile TDA are typical IRA-wide.

Eric Hines

One more thing on this: the tracking by the brokerage (and IRS) is made easier by the requirement that all TIRA withdrawals in any given year be counted against that year's RMD before they can be counted for any other use.

Eric Hines

It has been a few years but before my father passed away I recall sitting at the computer with him and he was showing me a RMD he was making at Vanguard and I could have sworn that Vanguard has a recommended/suggested RMD he needed to make. That was August 2021.

While a brokerage may not know all of your assets, they would know your age and your $ amount in their brokerage and can easily calculate the amount you need to withdraw from them. Now if you have 4 IRAs and decide to do all of the RMDs from only 1 account, that would mess things up, assuming that is allowed.

I know for something like an inherited IRA Fidelity provides me a dollar amount I should withdraw. I do my own calculations as well.

Rich

P.S. I gave up on Vanguard many years ago and the hassles with inheriting my father's accounts just confirmed my decision. YMMV.

Interesting. I have a couple of Vanguard accounts, and so far no problems. But I'm not RMD-ing yet.

Fido is also very helpful. We have accounts there also. I always favored Vanguard because they were not public, and didn't have report to shareholders whom only wanted growth and dividends.

I gave up on Vanguard many years ago and the hassles with inheriting my father's accounts just confirmed my decision = Rich

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I have all my investment accounts at Vanguard and have specified beneficiaries on all three accounts, so the entirety on my Vanguard Assets should pass outside of my estate.

If you don't mind ,could you elaborate on the nature of your hassles inheriting Vanguard accounts. If there are pitfalls I can steer around to make it easier and more fool proof for my kids, I would like to know.

thanks, bhm

Interesting. I have a couple of Vanguard accounts, and so far no problems. But I'm not RMD-ing yet. - 1pg

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Vanguard has an RMD Calculator on their web page. The link to the calculator and more info on RMDs just appear recently for me. Maybe they have had this feature for a long time and it now only visible to me since this the first year I have to take an RMD.

On the Vanguard landing page, the dashboard lists each of your accounts and their value down the left side. Underneath the TIRA account, this RMD link just appeared. It wasn't there in prior years.

Anyway, it's there, it works, and I have already accomplished my RMD for 2024. yeah!

I had planned to never take an RMD by fully converting my TIRA to a Roth before the RMD's started, but I fell two years short.

So now with the RMD out of the way, I will do a big Roth conversion which will almost drain the TIRA. Then in 2025, I will make second and final RMD and convert what's left to Roth. After that, no more TIRA, no more RMD's.

"So now with the RMD out of the way, I will do a big Roth conversion which will almost drain the TIRA. Then in 2025, I will make second and final RMD and convert what's left to Roth. After that, no more TIRA, no more RMD's."

I'm not sure why you want to eliminate RMDs. By taking a big Roth conversion, you will pay taxes at a higher rate than you would pay by spreading the distribution out over multiple years (assuming 'big' means bracket moving size).

Keep them to a manageable size - yes. Pay more taxes than required - no.

Just my philosophy. I just convert enough to stay within my bracket.

I'm not sure why you want to eliminate RMDs. By taking a big Roth conversion, you will pay taxes at a higher rate than you would pay by spreading the distribution out over multiple years (assuming 'big' means bracket moving size).

Keep them to a manageable size - yes. Pay more taxes than required - no. - Merumancer

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I am well aware of taxes, quite aware. I have an elaborate spreadsheet to compute my RMD and remain within the bracket of my choosing.

for 2024 the top of the 12% bracket is $47,150.

The top of the 22% bracket is $100,525.

And the top of the 24% bracket is $191,150.

My social security, small pension, and other income alone put me in the 22% bracket. I could do a really small conversion and stay in the 22% bracket. But moving into the 24% bracket opens up an additional $90K of conversion opportunity. So yes, I am paying more than the 22% min I am stuck with but the opportunity to convert $90K more each year is worth the extra 2%.

Starting with the 2025 tax year in the 22% rate established under the Trump tax cut will expire. The present 22% rate jump back to 25% and the present 24% rate jump to 28%.

Any dollars I convert now will avoid that 4% rate increase starting in 2026.

My intention is for my heirs to inherit a tax free Roth rather than a taxes pending TIRA.

Starting with the 2025 tax year in the 22% rate established under the Trump tax cut will expire. The present 22% rate jump back to 25% and the present 24% rate jump to 28%.</I?

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Oops, not what I meant to say. The lower rates expire on 12/31/25. The older higher rates will be applied to your 2026 income. My final Roth conversion will occur in 2025 at the lower rate.

Yes, I can see the strategy might be different for single filers.
As MFJ, we have a little more room in the size of the bracket. Also keeping a watch on IRMAA limits which kick in around the top of the 22%. I assume that is also pro-rated for single.
There is a material age difference between myself and Neurospouse, so we convert hers to reduce her eventual single filing issues.

There is a material age difference between myself and Neurospouse, so we convert hers to reduce her eventual single filing issues. - Neuromancer

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You may benefit from inverting that strategy. Consider,

Any person inheriting a Roth, other than a spouse, has ten years to deplete the inherited Roth. However, a spouse can treat the inherited Roth as their own and stretch withdrawals over their lifetime.

Your spouse, being younger, will enjoy many more years of tax free appreciation within a Roth inherited from you. Your spouse can resume converting their own IRA after you are gone.

Just a thought....

" a spouse can treat the inherited Roth as their own and stretch withdrawals over their lifetime.

Your spouse, being younger, will enjoy many more years of tax free appreciation within a Roth inherited from you. Your spouse can resume converting their own IRA after you are gone."

All true and known. Upon my passing, she will have both Roths, her remaining IRA plus whatever remains of my IRA. In the meantime, we have to live on something, which is what we use my IRA for. As a spouse, mathematically, I'm not sure there's a difference. When I pass, it'll be all combined anyway (Roths combine and IRAs combine as her own).

For more complicated families, your point is worth noting I think.

My issue with Vanguard and inheritance had to do with their security issues and their inability to fix the issue and not anything anyone else should have had to deal with.

A short summary:

At the time of my father's death I had no active accounts with Vanguard. A long time prior to that I had a work account which was eventually moved out of Vanguard and then later I had a personal account which was also moved out. So, probably no money with Vanguard for at least a couple of years.

Apparently at some point, years earlier, I had set up a verbal phone password and Vanguard wouldn't do anything w/o it. The solution was filling out a paper form to remove that security option with a notarized (gold medallion?) form. Ok, annoying but I can do that. The problem was that it was mailed back, acknowledgement from Vanguard that it received it but then when I called multiple times afterwards they kept insisting on a verbal password despite me following their instructions to disable it.

Eventually after a number of calls some guy was actually able to move the inherited money into my name and then I had it immediately moved to Fidelity.

Vanguard has some nice mutual funds and ETFs but as a brokerage they have been passed by both Fidelity and Schwab. Both of which have checking accounts/checks, Debit cards, etc. and I've found people who answer the phone timely and can get things done.

Many people, including when I was with them, would get these threatening letters saying there was an issue with my address or whatever and if I didn't contact them immediately they would lock my account. I called one time and the guy admitted the letter was written to get people's attention and was a bit over the top.

Different strokes for different folks. I read the bogleheads.org forum frequently where there are a lot of current and former Vanguard customers. I think most of the current Vanguard customers are old timers, people who use them via work 401Ks, or ones that want access to their mutual funds. Most others have moved on for better and more complete service.

If you are happy stay with them. From what I know it isn't as if there are issues like with the governments TSP for inheritors.

If you are happy stay with them. From what I know it isn't as if there are issues like with the governments TSP for inheritors. - Rich

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Thanks, that took a while to write and I appreciate it.

Yes I have been with Vanguard for 30+ years. I also had accounts at Ameritrade and T. Rowe Price. As I prepared for retirement, I slowly consolidated all into Vanguard, and have for the most part been satisfied with the things I used them for.

I was rocking along for years with my kids as beneficiaries, 50/50 on all three accounts. Then one day i ran across a story like yours, of someone who had a terrible time with an inheritance held by Vanguard. There I learned, that until all beneficiaries complete their paperwork, including setting up an account to receive their inheritance, Vanguard would not distribute anything to anyone. That caused me to change things because one of my kids is so irresponsible, he may not even be locatable at my death, meanwhile my daughter would wait and wait and wait. Not Good.

anyway, thx again

inheritance held by Vanguard. There I learned, that until all beneficiaries complete their paperwork, including setting up an account to receive their inheritance, Vanguard would not distribute anything to anyone.

Oh, crap. That's not good, and I suspect not even legal.
I think I'd better check Etrade and see what they do.

I'll be contacting Vanguard to see about the beneficiaries I have set up, to be sure everything will go smoothly. I will demand it in writing if they say it's good.

If they give me any hassle, Fido will be happy to transfer my accounts. I already have my rollover 401k at Fido.

Oh, crap. That's not good, and I suspect not even legal.
I think I'd better check Etrade and see what they do. - rayvt

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That is the beauty of forums such as this and TMF before they ruined it. We can learn from one another's experiences and navigate our own finances better.

I'll be contacting Vanguard to see about the beneficiaries I have set up, to be sure everything will go smoothly. I will demand it in writing if they say it's good. - 1pg

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Good. Since you are looking into this, I will share one other element of my experience with inheriting at Vanguard.

Upon learning that Vanguard will require all beneficiaries to do paperwork before distributing to any of them, I had to make some change. The obvious solution would be to set up a second Roth, then each one can having a different beneficiary. I would transfer half the assets to each, easy, peasy.

Nope, turns out all accounts with the same account type MUST have the same beneficiary designation. In other words, the second Roth in my example would inherit the same beneficiary designation as the first, so I would end up right where I started. The only way out is to set up the second Roth account at another institution. Stupid of Vanguard to provide this incentive. Anyway, beware.

Nope, turns out all accounts with the same account type MUST have the same beneficiary designation. In other words, the second Roth in my example would inherit the same beneficiary designation as the first, so I would end up right where I started. The only way out is to set up the second Roth account at another institution. Stupid of Vanguard to provide this incentive. Anyway, beware.

That's crazy.
Etrade certainly is not like that. Each account has its own beneficiary designations. You can also check a box that says "also apply these to the following accounts [_] [_] [_]", but that's just an option.

Another reason to have accounts at multiple brokers. This is the time of year when many brokers are paying a bonus to open/move an account. (So far this year I have made $500 & $300 & $300 by judiciously moving assets to new accounts. Silly brokers have breakpoints at $25,000 and $100,000, so move $25K to 2-3 brokers instead of $75K to one.)

It is looking to me like Vanguard had a great business model 30-40 years ago, but the world has passed them by while they did not keep up.

In my case it took me longer to get my beneficiary share of my father's estate from Vanguard (I mention why above) but I believe (well, fairly certain), my brother got his 50% share much sooner. So he did not have to wait for me to complete anything.

Fortunately we had few things we had to deal with. My father had accounts at Vanguard and TRowePrice, life insurance, ownership of the retirement apartment, a car, furniture, bank account and I think that was it.

Life insurance was pretty easy. Upload a death certificate and fill out a form. The only issue was that their web email had a size limitation and no one could tell me what it was. The resolution was to split the attachments into multiple emails and then my brother and I were sent a check.

TRowePrice was fairly easy. Mine was a big more involved since I don't have an account with them but my brother did. I gave the car to my brother and I took some of the furniture.

The apartment process I thought was a bit unfair but didn't shock me. First you have to clean the possessions out. Then you have to pay 3 more months of rent AND you have to pay some kind of fix up fee to "modernize" it. That was something like $20K. And finally you didn't get the money back until the place was re-purchased so we didn't see any money until 9+ months after he passed away.


I got a Tax EIN for the estate and set up a bank account for it. That was mostly a waste of time/effort since we only received one check made to the estate. I want to say it was from the state taxes.

I don't envy those with more complicated estates or ones that didn't have beneficiaries or wills set up prior to death.

Good luck
Rich

bighairymike wrote: "Then one day i ran across a story like yours, of someone who had a terrible time with an inheritance held by Vanguard. There I learned, that until all beneficiaries complete their paperwork, including setting up an account to receive their inheritance, Vanguard would not distribute anything to anyone. That caused me to change things...

Hi y'all, I just thought I'd pipe in here with personal experience about from several points of view with Vanguard beneficiary stuff.

I helped a family member as their POA, later as their executor, and as one of many beneficiaries to a taxable Vanguard IRA account they passed with. We had no problems with people getting their inheritance as soon as they contacted Vanguard. As executor I knew that one of the beneficiaries didn't contact Vanguard to collect their share for more than a year after most were disbursed. This was a few years ago. I guess their policy has changed to correct the issues that BHM heard about.

In decades of interacting with Vanguard on mine and a couple family members' behalf, I've never run into any issues with Vanguard that weren't resolved fairly quickly, though I do note service has gone downhill some compared to 30 years ago. The glitch bighairymike ran into with the old security code was undoubtably irritating.

I trust them to offer pretty much the best possible expenses and rates on index stock and bond funds and money market funds, and to not charge any sneaky fees. You can get their ETFs anywhere now, though, and I'm sure some of the other money market funds available out there are competitive, so if you want checking and debit card or other services I'm sure you can do just fine somewhere else. Checking now, the Vanguard money market funds (Federal, Treasury, and Cash Reserves Federal) are yielding 5.28-29% with expense ratios of .09-.11. Anyone beat that?

Speaking of checking....

There is a cute gimmick at Fidelity where you can get 5% on your checking account. I heard about it from a YT video, maybe this one: https://www.youtube.com/watch?v=LBwQRksnYbA

Checking in the CMA account (~2.9%), automatic self-funded overdraft from investment account (~5%). Make deposits to the investment account, check & debit card on the CMA account.

automatic self-funded overdraft from investment account
This one makes me nervous. I like having a relatively small balance in my checking in case something stupid happens and the bad guys drain it. I would much rather pay the overdraft fee than see my savings disappear. YMMV.
Rgds,
HH/Sean

Yes, you protect yourself by having multiple accounts. Which you conceptually treat as one account.
With these Fidelity accounts you essentially have a checking account that earns money market rates. And no hoops to jump through, like having to make 10 debit card transactions a month and direct deposit $x00 a month and keep $X000 minimum balance.


#1 is a CMA ("Spend & Save") which you write checks on. Core (sweep) account is FCASH, pays 2.7%. Free checks, debit card reimburses fees. All withdrawals come from this account.
#2 is an "Investment" account. Core (sweep) account is SPAXX, pays 5%. All deposits go to this account.
#3 optional. Another CMA or invest account, your choice. This is your "real" savings account.

Set cash management on #1 to self-funded overdraft, & minimum balance $10, using #2 as the source of funds.
Overdrafts from checks instantly pull money from #2, from the core account SPAXX.
Nightly, if the balance of #1 is below the minimum ($10), they automatically pull $250 from #2.

To move money from #1 to #2, you have to do that manually. But you never have to do that.
Direct deposits (paycheck, pension, SS, etc.) get deposited into #2.

The maximum that bad guys can drain is the total balance of #1 & #2. Essentially, your checking account. Same as any normal bank account which you have a debit card for.

Mentally decide on the high water mark of how much cash you want to keep in #1+#2. When you hit that, manually transfer the excess to the #3 ("savings") account.
If #3 is a CMA, FCASH is the core sweep, 2.7%.
If #3 is an "Investment" account. Core (sweep) account is SPAXX, pays 5%.

Oh, you can also have account #4. You "real" investment account, where you own stocks & mutual funds.

You would have $0 to $250 in #1, $2000 in #2, and $100,000 in #3, and the most a bad guy could hit you for is $2250.

I used to play this game in Alliant CU. Checking pays 0.25%, savings pays 3.10%. Direct deposit went into checking. Then after paying the bills I would move the remaining balance into savings. You can set checking overdraft protection to have them pull money from a savings account, but I suspect that if this happened often they would slap your hand. Banks don't like it when you never deposit money into your checking account except for automatic overdraft protection.

Fidelity encourages you to set it up, so no risk of handslapping.

Ray,
Very helpful! If I may get a further clarification, FCASH is checking, SPAXX is saving #1, and what do you use for saving #2? Would Fido allow two different SPAXX accts?

Thanks,
HH/Sean

Very helpful! If I may get a further clarification, FCASH is checking, SPAXX is saving #1, and what do you use for saving #2?

The core sweep account in a save&spend account is FCASH. You could go ahead and buy SPAXX or any other fund you like. FLRN is a pretty good ETF, currently pays 5.91%. But it is a bond fund, so the price goes up and down.
For a money market fund, I like FDLXX (FIDELITY TREASURY ONLY MONEY MARKET FUND). It yields about the same as SPAXX but is state income tax free. Again, it is not a possible sweep account so you have to manually buy it.

The neat thing is that when they do a self-funded overdraft pull from your #2 (investment account), they first pull from the core (SPAXX) and then from any other non-core Fidelity MM fund. So if you had FDLXX it would pull from that, but it would not pull from FLRN because FLRN isn't a MM.



Would Fido allow two different SPAXX accts?

Sure, no problem. You can have many accounts, and each one can have any holding. There is no problem having the same holding in different accounts.

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