403b to Rollover IRA & RMD
My client is 79 yrs old, and currently has a 403b that she was contributing this year, up til the end of August, when she officially retired. My questions are the following: Does she have to take an RMD for 2007, in 2007 or is her RBD extended up to April 1, 2008, for 2007 RMD?; Second, do we need to retitle the 403b as an Rollover IRA this year, or can we wait till 2008, and how does that affect her RBD and RMD for this account? I’ve checked TAX Facts and it seems that we have til 4-1-08 to take her 2007 RMD, and I understand that she will also have to take her 2008 RMD by 12-31-08. Is this correct?
Permalink Submitted by Alan Spross on Fri, 2007-12-07 04:16
Yes, your final statement is correct. She WILL have a 2007 RMD for the year of retirement, but the RBD for that is 4/1/08. Since she worked 2/3 of the year in 2007, postponing the RMD to 2008 and taking two RMDs then likely levels out her taxable income somewhat.
Prior to transferring the 403b to a traditional IRA account, she will either have to take RMDs due up to that point or the plan will have to withhold them from the rollover. That’s the 07 RMD for a transfer prior to year end, and two RMDs if the transfer takes place in 08. Therefore, the date of transfer also has an effect on which year the 07 RMD is reported.