Roth 401k RMD
A 69 year old working business owner is 100% owner of his business and has a 401k/Profit Sharing. He has pre-tax 401k assets and Roth 401k assets in his retirement plan. My understanding is that when he turns 70 1/2 he will have to take his RMD from his profit sharing plan, pre-tax 401k, and even his Roth 401k because he is a greater than 5% owner in the company. If this is correct, would it be a viable strategy for him to roll over his Roth 401k money to a Roth IRA right now (assuming the plan permits in-service withdrawals), thus eliminating his requirement to take RMDs from his Roth 401k at 70 1/2?
Thank you!
Permalink Submitted by Alan - IRA critic on Mon, 2013-07-01 19:09
Yes, as a 5% or greater owner he must start RMDs from both portions of his plan at 70.5, or at least prior to the required beginning date in the following year. However, the Roth RMDs can be avoided by rolling the balance over to a Roth IRA. This rollover should be completed prior to the year he will reach 70.5 to avoid Roth 401k RMDs for that year.