RMD from 401k
An executive age 78 is retiring from his firm and has a large 401k. He wants to either roll it to an IRA or do a partial/full conversion to a Roth IRA.
In either case, will he be forced to take RMD first then do the rollover or is that a plan specific rule? I know RMD is needed but dont know if it must be done prior to conversions vs waiting until year end.
If he leaves the funds in the 401k and retires this year, must he take his RMD by year end?
Permalink Submitted by Alan Spross on Mon, 2010-07-12 19:29
If he has not had to take RMDs in recent years, he is not a 5% owner of the firm. If he retires this year, 2010 is an RMD distribution year, but the required beginning date is 4/1/2011. If he leaves the funds in the plan, he can defer the 2010 RMD until the end of March, 2011 and would then have to take his 2011 RMD prior to 12/31/2011. But if he does an IRA rollover OR Roth conversion, the RMD for the year of the rollover must be held out of the rollover and/or distributed to him first. If the rollover is done this year, the 2010 RMD must be taken out first, and if he waits until next year, then both year’s RMDs will have to be taken out first. These are IRS rules, not plan specific rules.