RMD for non 5% owner retiring after age 70 1/2

Submitted by Howard Hook on Thu, 2016-12-22 16:27

Employee (non 5% owner) retires in December 2016 from work.

Regarding their 401k plan, it appears that their required Required Beginning Date (RBD) is April 1 of the year following year of retirement, in this case 2017.

Question – Since RBD is 4/1/17 do they only have to take 1 distribution in 2017?

If RBD is 4/1/17 does that mean if they take the distribution in Feb 2017 it does not qualify for the RMD?

Thanks as always

Howard



Submitted by Alan - IRA critic on Thu, 2016-12-22 16:46

  • They would have to take two, one for RMD distribution year 2016 by 4/1, and another for distribution year 2017 by 12/31/2017. However, if they worked the entire year in 2016, deferring the 2016 RMD will probably equalize their taxable income.
  • In this example, ANY distribution taken in 2016 (including an IRA rollover) is credited toward the 2016 RMD. Any distribution taken in 2017 by 4/1 is credited against any remaining 2016 RMD, and once the 2016 RMD is complete is credited toward the 2017 RMD, even when taken prior to 4/1.
  • If employee could delay retirement until January, it would push back the plan RMDs by a year. Regarding year end retirements, the retirement date is considered to be the last day of employment, not the first day of retirement.


Submitted by Howard Hook on Thu, 2016-12-22 18:12

Thanks Alan!Appreciate the helpHoward  



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