70 1/2 rule in relation to IRA and 401k

Submitted by Leslie Lammers on Wed, 2017-04-19 18:37

Client turns 70 1/2 in September 2017. He has a 401k at his current firm and will not have to take distributions from those assets until he retires. He will keep working for 3 more years. He has an IRA as well. Can he avoid having to take a 2017 IRA distribution by moving his IRA back into his 401k before he turns 70 1/2 in September?

Thanks, Leslie



Submitted by Alan - IRA critic on Wed, 2017-04-19 20:53

  • No, because any IRA distribution beginning Jan 1 of the year an IRA owner will reach 70.5 is applied to the IRA RMD for that year unless the RMD has already been completed. A non reportable IRA to IRA direct transfer can be done without affecting the RMD because it is not considered a distribution, however a direct rollover from an IRA to any other type of plan is considered a distribution and rollover and therefore is applied to the RMD.
  • Note that the 401k should inquire about any after tax IRA basis and the IRA RMD status before accepting such a rollover because the plan cannot accept such rollovers. If a client and the 401k plan overlook this issue and the direct rollover to the 401k is done, the client must report the RMD as taxable income and his IRA RMD has been completed. However, the plan has accepted an amount that was not rollover eligible and must distribute that amount plus allocated earnings back to the client.

Submitted by arun parikh on Sun, 2017-04-23 04:26

similar situation.  i turned 68 in march 2017.  will continue at state govt job until 72-73can i rollover my ira to my govt 457 plan, thus avoiding ira rmd at 70.5?

Submitted by Alan - IRA critic on Sun, 2017-04-23 15:55

Yes, you can if the 457 accepts IRA rollovers. You should complete the rollover prior to the year you will reach 70.5. However, you should not do this too soon, or if you do be sure that you can get distributions from the 457 plan if you need them before you retire.

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