70 1/2 Withdrawal Requirement from 401(k)
Client is 70 1/2 this year so is looking at making RMDs from his IRAs and Single 401(k) plan. He is self employed and only person in the Single 401(k). He has both Roth and Traditional (before tax) monies in his 401k. He has to take an RMD in 2013 from his 401(k) as I understand it. In calculaing his RMD from the plan, does he just look at non-Roth monies in the plan on 12/31/12, or must he use the 12/31 balance of the entire plan–both Roth and non-Roth contributions to date?
He made a large Roth conribution for 2012, depositing it after January 1, 2012. What determines the 12/31 plan balance subject to RMD in 2013?
Can he rollover tha entire Roth plan balance to a Roth IRA in 2013 and not pay an RMD on the Roth contributions? — What will this do to his 2014 RMD requirements?
Permalink Submitted by Alan - IRA critic on Fri, 2013-04-26 18:07
Roth 401k balances are subject to RMDs, therefore his plan RMD is based on the separate pre tax and Roth balances on 12/31/2012. If his plan allows him to take distributions, after taking his 2013 Roth RMD, he should roll the Roth balance over to a Roth IRA to eliminate future RMDs, except for the pre tax plan balance. Again, this rollover can only be done after he has taken his 2013 Roth 401k RMD. While he can defer the RMDs to 4/1/2014, doing that will just add another year of RMDs from the Roth portion. Of course, if he plans to close the business before year end, it may still pay to defer the 2013 RMDs if he will be in a lower marginal bracket in 2014 due to retirement.
Permalink Submitted by Walter Apelt on Sun, 2013-05-26 17:02
He deposited his 2012 Roth 401k contribution after Januray 1, 2013 …not 2012 as I indicated. Does this additional amount get added to the actual 12/31/12 (statement) Roth balance in the 401k for 2013 RMD purposes?
Permalink Submitted by Alan - IRA critic on Sun, 2013-05-26 23:26
No. The actual 12/31 balance should be used.