RMD from 401K plan rollover just before participant turns age 72 in 2021

Submitted by Amrish Patel on Thu, 2021-01-28 00:25

My client has terminated employment in 2020. Client age: 71.

Her 401K account was submitted for the rollover to TRaditional IRA from Vanguard, However, Vanguard is forcing to pull RMD before the rollover happens even though she will not turn 72 until later in October 2021.
Can she roll the entire amount and then take RMD by end of the year from rollover IRA acct vs forcing through 401K plan amount as she would prefer?

Also, she is asked to pull RMD based on the joint life table and using her husband’s age of 76 at a divisor of 18.8, IS this correct?

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Permalink Submitted by David Mertz on Thu, 2021-01-28 03:40

Vanguard is correct in requiring the 2021 RMD to be satisfied before the remainder is rolled over to an IRA in 2021; the tax code does not permit doing otherwise. The first distributions from the 401(k) in 2021 are RMD until the RMD is satisfied and RMDs are not eligible for rollover. The date that she reaches age 72 in 2021 does not matter.
The joint table applies only if her spouse is more than 10 years younger, which he is not. Her RMD divisor from the Uniform Lifetime table based on being age 72 in 2021 is 25.6, so it makes no sense to use the Joint Life table that would require a higher amount to be distributed. She can always take out more than her RMD.
Note that for 2022 she will need to calculate her RMD using the new tables which go into effect for 2022.