[Boomer]

I cannot get the WSJ article linked in the first post here to open now, but I read it when it was first posted and although it had good info, I found one part to be confusing.

Anyway, the part I did not get was about the timing. The WSJ writer was warning about the "first dollars out rule," but her example was not clear to me, so I went on a search that resulted in my concluding that she must have been talking about recharacterization not being allowed, but she did not use that word 'recharacterization.' I am guessing from an article I found that's what she meant???

Below I am sharing, via cut and paste, a part of that different article, titled "Clearing Up QCD Confusion," found on the Morningstar site. The writer of this article is Christine Benz who is Morningstar's Director of Personal Finance, along with a long list of other accomplishments. I have seen her interviewed by Consuelo Mack on WealthTrack.

If you want to know more, you can find the entire article with a Google. Meanwhile, here's the part about timing the QCD..........

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Timing Matters
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For starters, there's no "grace period" for doing a QCD. In contrast with IRA contributions, which can be made up until the tax-filing deadline, typically in mid-April, you couldn't do a QCD in mid-April 2021 and expect it to count on your 2020 tax return.

Additionally, an RMD, once taken, can't retroactively be classified as a QCD, according to Slott. For example, let's say that a 74-year-old needs to take a $22,000 required minimum distribution from his traditional IRA for 2021. He likes to take his RMD early in the year so he won't forget, so he took his $22,000 RMD in March. If, later on this year, he's thinking about charitable contributions and would like to do a QCD, he can't recharacterize his early-year withdrawal as a QCD. Rather, because of what's called the "first dollars out" rule, which holds that the first dollars pulled out of an IRA by RMD-subject investors are applied to satisfy RMD amounts, that early-year withdrawal will count as his RMD and affect his adjusted gross income accordingly. He can still do a QCD later that year, by steering additional funds from his account to charity (more on contributions in excess of RMDs below), but that amount would be on top of the amount he already withdrew to satisfy his RMDs. In other words, if his goal was to align his RMD with the QCD, he blew it.

Because of that "first dollars out" rule, Slott and other tax experts urge RMD-subject IRA holders to strategize about QCDs and RMDs at the beginning of each year, before withdrawing any funds from the IRA.


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Boomer