401k
I am doing a financial plan for a lady who turned 70 1/2 in 2016.
Her husband died about 12 years ago. The 401k was put in her name, and the statements just have her name not her husband’s name with her as beneficiary.
She had not been contacted by the 401k people when she turned 70.5 that she should start RMD’s.
After talking with us, she called the brokerage firm that has the 401k, reminded tham that she had turned 70 1/2 last year, and asked what her RMD’s would be for 2016 and 2017.It took her several phone calls before she could find somebody with any answer. They gave her numbers that were too high per the Uniform Lifetime Table and her age. She called them again, and it turns out they were using the Uniform Lifetime Table with her current ages. They also said it was set-up with her as beneficiary, but the account statements don’t back this up.
Are there any other recommendations you have besides (1) moving this to up a higher level at the brokerage firm to fix it or (2) just distributing what they say for 2016 and 2017 and rolling it over to an IRA in her name?
Permalink Submitted by Alan - IRA critic on Sat, 2017-02-25 00:44
She can only have beneficiary status for the 401k. If she was the sole beneficiary when her husband died, her RMDs do not start until the year he would have reached 70.5 (not when SHE reaches 70.5). If that year passed without an RMD being distributed the plan has violated the IRS RMD regulations and could be penalized. If husband would not yet be 70.5 she has no RMDs, but when her beneficiary RMDs are required to begin they will be much more than if she did a direct rollover to her own IRA where the Uniform Table would apply and where she could name her own beneficiary who would eventually inherit with a life expectancy stretch, rather than receiving no new stretch if her beneficiary inherited the 401k. Let’s start by identifying the year her husband would reach 70.5 to see if there is a problem. Unless husband was younger than her AND she wants to delay RMDs as long as possible, she should do a direct rollover to an IRA ASAP.
Permalink Submitted by Janis Sleeter on Mon, 2017-03-06 19:36
The 401k provider said they didn’t have her late spouse’s DOB. They said they had taken over the plan from someone else. She was never aked for hubby’s DOB, and they didn’t notify her on RMD’s at all.We will take care of old RMD’s and get this moved ASAPThanks