401k after 70
An employee begins contributions to his 401k for the first time in January of the year he will turn 70 1/2. He retires at the end of that year after accumulating, say, $20K in the 401k.
True or false: His RMD for this year is 0 since it is based on the balance as of 12/31 of the prior year — which is before he had even opened his account.
Permalink Submitted by Alan Spross on Thu, 2010-05-06 22:46
True – no 12/31/09 balance and therefore no 2010 RMD required.
Permalink Submitted by William Adkins on Tue, 2010-05-11 18:45
If a person is over 70 1/2 and still working and contributing to a 401k, does the RMD rule still apply? Does that person have to take a distribution from their 401k?
Permalink Submitted by Alan Spross on Tue, 2010-05-11 20:22
Usually there is no RMD requirement for a year in which the employee is still working for that employer at year end. The exceptions are:
1) Employee is more than a 5% owner of the business
2) The plan is one of the few that requires all employees to take RMDs at 70.5. This is rare, but certainly possible.