Inservice Withdrawals- Final Destination ROTH Conversion
I showed my client who is 55 what the future RMDs maybe with regards to taxes. She has a generous pension beyond $150,000 a year. Her RMDS will be sizeable with a healthy return. I recommended she consider taking in-service withdrawals of her 401k to an IRA to diversify .
Ultimately, I want to convert the IRA monies this year to a ROTH and convert to avoid her sizeable RMDs at 72.
Is it permissible to do an inservice withdrawal every year from her 401k and then convert to a ROTH IRA every year?
What other factors do I need to consider? Does this strategy make sense? Am I missing something?
Permalink Submitted by William Tuttle on Mon, 2021-10-04 20:08
The tax code and IRS regulations prohibit an in-service rollover of employee deferrals prior to age 59 1/2.
The tax code and IRS regulations allow but do not require an in-service rollover of employer contributions prior to age 59 1/2.
However, most plans have age, length of service, aging of contribution restrictions. Some plans even restrict employer contributions until age 59 1/2.