RMD’s for individual post age 72
I have a 77-year-old client who is still working. She has 401k and 2 IRAs. She is taking RMD’s from her IRAs and deferring on her 401k. She just informed us she is going to work a couple of more years so we’re going to move the funds in her IRA into her 401K. We already checked with the 401K provider and they will accept rollovers.
My question is if we move money into her 401k before the end of the year, does that get her off the hook for having to take her RMD’s for 2021 from her IRAs? She took them on 12/01/21 so we are still within the 60-day rollover period. What is the IRS ruling on individuals RMD age that move money from their IRAs into their qualified plan (assuming they are still working)?
Permalink Submitted by Alan - IRA critic on Fri, 2021-12-17 15:34
The IRA 2021 RMD is required and therefore the IRA distribution just taken cannot be rolled over. Reduction of RMDs will start in 2022. Had the RMD not been taken and the entire IRA balance rolled over, then the RMD would have been part of the rollover and the 401k would have received an excess amount equal to the IRA RMD that would have to be returned from the 401k. This client will have to work into Jan, 2023 to have any RMD reduction, since the calendar year in which she retires will become a 401k RMD distribution year.
Permalink Submitted by Robert Roselli on Fri, 2021-12-17 17:00
So it sounds like once the calendar year starts and RMD is required. For example, if I move the IRAs into the 401K before 12/31/2021, then the IRAs will have a balance of $ 0.00 so no RMD. However, what if I didn’t roll the IRA s into her 401k until January 4th, 2022. In that example would she have to take an RMD for 2022. I am trying to find out at what point does and RMD becomes mandated. Is it if he held a balance on 12/31, then you have an Rmd for the following year. It sounds like I should make this transfer over the next 2 weeks.
Permalink Submitted by Alan - IRA critic on Sat, 2021-12-18 04:00
If the IRA had a balance on 12/31/2020, there is an RMD due for 2021. This 2021 RMD cannot be avoided by a rollover. However, a rollover of the entire balance after the 2021 RMD is distributed will eliminate an IRA RMD for 2022. If that rollover is not done this year, then 2022 will have the same requirements as 2021. Put another way, a rollover of the IRA balance after the RMD has been distributed will not affect the RMD for the current year, but will eliminate the IRA RMD for the following year. Therefore, it is good that she took the 2021 IRA RMD before rolling over the remaining balance.