About Required Minimum Distribution (RMD), Some in After Tax Dollars??

Forum|Forum|1 year ago
June 14, 2025
17 replies
162 views

I turned 73 this year and so I’m required to withdraw a Required Minimum Distribution (RMD) on my retirement accounts.

In one of those accounts the number I had calculated (12/31/24 balance / age factor for 73) was exactly the same number determined by the financial company in which I have that money invested…. So far, so good…. But when they withdrew that amount, they told me that a very small amount of the money in that withdrawal, a little over 2% of the total amount withdrawn, was AFTER TAX money…. Based on something I must have paid tax on close to 40 years ago….

My thought would be that the IRS would want me to withdraw a little bit more money such that the total amount withdrawn, 100% in BEFORE TAX dollars, would hit that total amount calculated as the required RMD. That they would want ALL OF IT to be BEFORE TAX $$’s because my thought is the IRS is wanting TAX on the calculated amount…. But if some of the calculated amount contains some AFTER TAX $$’s, they would not be getting the full amount they seek in the RMD….

But all that I’ve been able to read or hear from folks who seem to know is that all I have to do is withdraw the full calculated amount and that’s it, even if a part of that withdrawn amount is NOT going to net the government any additional taxes????

Can you help??? Am I good with just withdrawing the calculated amount even if some if that amount is AFTER TAX money??? Or do I need to take more out until I hit the calculated amount with 100% PRE TAX $$’s???? thanks….

Not A Product Question

VolvoGirl

Level 15

Yes don't worry about that. It's only the gross amount you need to withdraw. Not the taxable amount. You just have to take out the RMD minimum amount. The after tax amount should be on your 1099R in box 5.

diittoAuthor

Level 4

Thanks VolvoGirl... What you say is what I'm learning elsewhere as well... But I guess my question comes down to "WHY" the IRS wants us to take out an RMD in the first place... It's my belief they compel RMD's at a certain age because they want us to pay tax on that money... There is NO RMD requirement on say ROTH accounts and I get why, because that money has already had taxes paid when the money was first invested... But I contend for my tax deferred (before tax) money, they are seeking TAXES and I would think they would want to say we want you to take out an amount of money for an RMD that is 100% BEFORE TAX... You and others are telling me it's not that way and so I get it but I'm one of those types that likes to understand why... Still seems to me that the sole purpose for RMD's is to get tax revenue into the IRS so what's in it for them if they allow me to have part of my RMD be money on which the IRS gets nothing??? Does that make sense??? I get that I'm not likely phrasing the question very well... So I'm sort of ok with saying "OK, I've met the requirement for taking out the correct amount for my RMD"... Check... But I still don't get the part about why the IRS should be ok with me only having say 98% of the money be BEFORE TAX... I mean what if it was say 50% BEFORE TAX and the other 50% AFTER TAX... They would only get half of the tax money I believe the RMD formula was really intended to grant them... But they're ok with that??? I get the numbers... Just not the IRS reasoning... Thoughts on that??? Sorry I'm being complicated but I'm just trying to understand... My first year at RMD's... thanks for the help...

diittoAuthor

Level 4

Oh, and yes, I'm a classic overthinker so there's that... < sigh > ... Thanks again!!!!

fanfare

Level 15

based on your 2% figure, the taxable amount on your 1099-R will be 98% of the amount you had distributed.

@diitto

dmertz

Level 15

The fact that the financial institution knows that any part of the distribution is nontaxable means that the distribution is not from an IRA. A financial institution has no way to know if any particular amounts distributed from an IRA are taxable or not.

As VolvoGirl said, the both pre-tax and after-tax portions distributed count toward the RMD for that account.

The point of retirement accounts is to supplement income during retirement, so Congress put provisions into the law to make sure that these funds would eventually be distributed, preferably to the employee rather than to the employee's beneficiaries. As you pointed out, it also makes sure that the collection of taxes on this deferred income would not be pushed out to the future indefinitely.

If you are inclined to make QCDs, the funds in a qualified retirement plan could be rolled over to an IRA after having completed the RMD for the year. In this case, since the funds have an after-tax component, the rollover could be split between traditional and Roth IRAs with the pre-tax portion going to the traditional IRA and the after-tax portion going to the Roth IRA. After that, you could make QCDs from the traditional IRA.

diittoAuthor

Level 4

Got it... Thanks. I appreciate the help... I've heard and read enough now to believe that even though a part of my 401k RMD was POST TAX, still that along with the PRE TAX dollars, added all together, MEET the RMD REQUIREMENT... I was just questioning the logic when it appeared to me that the IRS was just seeking tax money so why would they want 100% of the RMD to be PRE TAX... But you make a good point that the government's main intention was likely to help supplement income NOW and not so much just about the government gaining more tax money... So I'm good with now having satisfactorily withdrawn four RMD amounts from four different retirement accounts I have...

Now if I can just learn how, next year, to be able to get TT to help me properly report those RMDs and pay the appropriate (regular income) taxes on those amounts... See above where I've asked one more question about how and where these RMD's get reported in TT... I still have the 2024 TT Deluxe version on my Mac computer that I might soon go back in to just to look around and see if I can see where such gets reported... Or any input from you folks on that would be much appreciated... thanks for all the help...

VolvoGirl

Level 15

Some more info. IRA and 401K are separate and have different rules. For IRA accounts you need to figure the RMD from each account but you can take the total RMD out from just 1 account or spread it around from other IRA accounts. And as said above you can only take a QCD from IRA accounts (not 401k).

For 401k accounts you need to take out the RMD from each 401k. IRA accounts go on 1040 line 4 and 401k go on line 5. Here is IRS pub 590b about taking distributions.

https://www.irs.gov/pub/irs-pdf/p590b.pdf

You will get a 1099R for each account IRA & 401k distributions. They get entered in the same place. The IRA accounts will have a X in a little box between boxes 7&8 to tell it that it is from an IRA. Here is a 1099R

https://www.irs.gov/pub/irs-pdf/f1099r.pdf

Since you have the Desktop program you can copy your return to test and practice in. Go up to File-Duplicate on Mac and give it another name. Don't mess around in your real return. Oh you can still buy Deluxe. All the Desktop programs have all the same forms. You just get more help in the higher versions.

Enter a 1099R under
Federal Taxes
Wages & Income
Then scroll way down to Retirement Plans and Social Security
Then IRA, 401(k), Pension Plan Withdrawals (1099-R) – Click Start
If you are adding another 1099R there might be a Add button at the bottom of the list.