401k Rollover to IRA at age 72
Hello,
I am a financial planner and have a client age 72 who retired in June 2013. She must roll over her 401k by the end of October.
1. This is a new IRA. What is the RBD for distributions? Will the 401k distribute before rolling? No distributions were taken while client was employed.
Same client was just paid a lump sum from a pension to an IRA on September 1st.
1. This is a new IRA. What is the RBD for distributions?
Thanks so much for your help!! It has been difficult for me to find an answer to these questions.
Best,
Ann
Permalink Submitted by Alan - IRA critic on Mon, 2013-09-23 18:08
Since the retirement in 2013 makes 2013 an RMD distribution year for the 401k, the plan RMD should not be included in the rollover. If client waited until January, they could avoid a plan RMD in this year’s income, but would then have to take both the 2013 and 2014 plan RMDs before doing the rollover. This also applies to the pension lump sum, in other words the pension RMD should not have been rolled over. If it was, the RMD amount becomes an excess IRA contribution that must be corrected. Once the plan RMDs are completed, the IRA balance on 12/31 will determine the 2014 IRA RMD. If an IRA balance existed on 12/31/2012, there would be an IRA RMD in 2013, otherwise no IRA RMD until 2014. Note that if the 401k includes highly appreciated employer stock, client may wish to consider NUA potential for those shares.
Permalink Submitted by Ann Minnium on Mon, 2013-09-23 23:28
Alan-Thanks so much for such a quick and well defined response. It is very much appreciated!Best,Ann