Charitable RMD from 401k rollover
An 80 year old is gainfully employed and part of company’s 401k plan. He wants to take an in-service distribution from the taxable portion of his 401k and roll that into a new, regular IRA. Company 401k plan allows for that. Then he wants to use his IRA roll over money to fund his RMD through a charitable contribution from the IRA. Broker-dealer research department says he has to wait until the following year until the rollover money is eligible to fund an RMD charitable contribution. Is that correct?
Permalink Submitted by Alan - IRA critic on Thu, 2018-05-31 03:43
Yes, that is correct. By rolling part of his 401k that is not yet subject to RMDs into an IRA he is causing his RMDs to increase by creating an IRA RMD, but not until 2019 since he has no IRA balance on 12/31/2017. Note that he could still do a QCD from his IRA rollover this year, but since there is no IRA RMD this year, that QCD would just reduce his retirement assets without paying taxes. That would still be preferable to making a regular charitable contribution if he cannot itemize it because he would be making that contribution with pre tax dollars, but there is no RMD to offset for 2018.