Can non-deductible contributions be used to satisfy RMD?
Client has $1MM approx 401K, with $33k non-deductible contributions.
I wanted 401K company to issue a check to him for $33k, then roll the rest to his IRA…from which he could take his RMD for the year (about $38K).
Instead, the 401k company issued a check to him for $38k – which includes $33k of non-deductible contributions – and told him that’s all he needs to do to satisfy the RMD for the year.
IS THAT TRUE? Can the non-deductible amount satisfy RMD? Sounds fishy.
Were they correct, or should I have him distribute more from his IRA?
Any help appreciated!
Permalink Submitted by Matt Harrington on Wed, 2007-12-05 18:56
Hate to reply to my own question, but I just wanted to update readers on the response I received from a trusted source:
RMD calculator specifies the $$ amount that should be taken from a qualified plan – the calculations makes NO distinction on how much must be fully taxable.
If IRS says take $X from the plan, take $X from from the plan…it doesn’t matter if some of that is tax free due to non-deductible contributions.
Please pass comments/opinions if you have them.