RMD’s on 401K Rollovers after Age 72

Submitted by Joshua Britton on Wed, 2021-03-24 20:21

I have a client (74 years old) who is still working, but will be retiring in 2022. He wants to roll the 401K over now (in-service dist) but is worried it will trigger an RMD for this year (2021.) He does not have an existing IRA so it would be all new money and account. Would the assets trigger an RMD for 2021 or would it trigger the RMD for 2022? Would the 401K be required to process the RMD before able to roll over the assets?

Thanks



Submitted by Alan - IRA critic on Wed, 2021-03-24 22:45

There would only be a 401k 2021 RMD if he retired before the end of 2021, or if the plan required all employees to take RMDs starting at 72 whether working or not. This is rare. The first IRA RMD will be in  2022.

Submitted by Sheri Karpa on Mon, 2021-11-15 19:34

Wouldn’t this client have a 2021 RMD from the IRA since they are over 72 and still working? Isn’t the rule “the earlier of age 72 or April 1 of the year following retirement”? Since this client is 74 and still working, wouldn’t that trigger a 2021 IRA RMD?

Submitted by Alan - IRA critic on Mon, 2021-11-15 21:25

There was no IRA balance on 12/31/2020, therefore there is no IRA RMD for 2021. The first IRA RMD will be for 2022. For 2021 there would be a 401k RMD if the client was a >5% owner of the company, and that RMD would not be eligible for rollover.

Submitted by Sheri Karpa on Mon, 2021-11-15 21:48

Thank you for the clarification. Super helpful. 

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