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Originally Posted by Boomer
Thank you. . .that brings me to another question, or two:
So, am I understanding correctly that the operative words there are “accrued” and “would be”……..
Does that then mean that the brokered CD’s interest is projected and taxable (or figured into next year’s RMD amount) though not paid out in the current tax year? (Kind of phantom-like?)
Actually, the CD I have is in an IRA. It will not reach its term until 2024 when it will pay the interest to me — no compounding along the way, I know. BUT……..
It sounds like “accrued” interest will apply inside an IRA, too; therefore, having an effect on next year’s RMD. Is that how it works?
If so, how is the accrued interest figured? Does an interest amount just show up on 12/31, even though it is not accessible to the CD holder yet?
I am brand new to brokered CDs. I obviously need a little fine-tuning on the subject.
Boomer
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I am only about 99 percent certain, but CDs generate taxable income every tax year regardless of whether or not the interest is actually paid to the owner. The earned, but not paid, interest is included in the December 31 valuation of your total IRA, and that is the amount used to calculate your RMD for the following year. Note that, with a brokered CD, you can sell it at any time at the current value, and you will not lose any accrued interest up to the date of the sale. Some people have stocks, gold, and even real estate in their IRAs, but the RMD is still calculated on the market value of the IRA assets as of the end of the year. The RMD is always calculated on the market value of the IRA assets on December 31. And, unless you have a self-directed IRA, you have an IRA custodian, who is responsible for determining the market value of your IRA assets, and reporting it to the IRS.