Rollover for a 70 1/2 year old
Client is turning 70 1/2 in June of this year (2012) and has not yet begun to take his RMD but will before 12/31/12.
1) He has a 401k at his old job from which he retired late in 2011 which had a balance of $ 250,000.00 on 12/31/11.
He wants to do a Trustee to Trustee TRANSFER of this 401k to an NEW IRA Brokerage account that will be established soon.
Can he TRANSFER the ENTIRE present balance into the NEW IRA and take the RMD from this NEW IRA before 12/31/12 based on the $ 250,000.00 12/31/11 balance??
Or must he first take his RMD from his 401k and rollover the balance into the NEW IRA???
2) He also has an IRA at a bank which had a balance of $ 75,000.00 on 12/31/11.
He wants to consolodate his retirement accts so he wants to TRANSFER this IRA to the NEW Brokerage IRA account.
Can he transfer the ENTIRE present balance into the NEW IRA and take the RMD from this NEW IRA before 12/31/12 based on the $ 75,000.00 12/31/11 balance??
Or must he first take his RMD from his OLD IRA and rollover the balance into the NEW IRA?
Thanks for your help,
Permalink Submitted by Alan Spross on Mon, 2012-03-26 19:04
1) The latter. Since 2012 is an RMD distribution year for the client, the plan will have to pay out the RMD and not include that amount in the direct rollover to the IRA.
2) Yes, he can do the direct transfer from one IRA to another without considering the RMD. Because IRA RMDs can be taken from any IRA the client may own, the IRS Regs allow direct trustee transfers between IRAs to ignore RMD considerations. Note that this would not work if he took a distribution from the 75k IRA in order to do an indirect 60 day rollover to the new IRA since a distribution is applied to the RMD requirement in an RMD distribution year. Therefore, this change should be done by direct transfer.
SInce client’s actual RBD is not until 4/1/2013, he could defer all or part of the 2012 RMD to 2013, but would then have to take two RMDs in 2013. This also applies to the 401k, but doing the direct rollover to an IRA in 2012 will require that the 2012 RMD be held out of that rollover