Delay RMD from old 401k
I have a non-5% owner executive client with a 401k left behind from a prior employer. He is still working at age 70 (not an owner) with a new 401k. He also is the owner of his own business with his son and is setting up a SOLO 401k. On top of this, he is wealthy and wants to delay any RMD as much as possible to avoid taxes.
1. Will he be forced to take RMD from the ex-firm since he is no longer there?
2. Can he delay this RMD by having the old 401k roll to his current 401k?
3. Since he will be an owner of the Solo 401k, won’t he have to take RMD from it even though he can feed it as long as he has the outside busienss?
4. Is he limited to $20.5k salary deferral TOTAL between his current 401k and his Solo 401k?
Permalink Submitted by Alan Spross on Fri, 2008-01-11 19:27
1) Yes, he must take the RMD from old 401ks where he is no longer employed.
2) However, he can eliminate future RMDs if his current plan will accept an incoming rollover of the old 401k. But not the solo K.
3) Yes, you are correct. Contributions can be made while RMDs come out.
4) 20,500 combined deferral limit.
Permalink Submitted by Denise Appleby on Sun, 2008-01-13 13:51
…and bear in mind that the receiving plan is not required to permit the deferral of RMD for employed participants. Treas. Reg. 1.401(a)(9)-2, Q&A 2(e). Therefore, if the plan does not permit the deferral, then [url=http://retirementdictionary.com/Required-minimum-distribution.htm%5DRMDs%5B/… begin by April 1 of the year, following the year the individual reaches age 70 ½ . So, to be sure that option applies the SPD should be consulted.
Since you can contribute up to ( the lesser of 25% of your W-2 wages or 45,000 ( $46,000 for 2008) to your [url=http://retirementdictionary.com/SBO-401k.html%5DSolo-k%5B/url%5D ,that may help to offset the effect of taking your RMD amount. If you are unincorporated, the percentage amount is not 25% of W-2 wages, but is instead 20% of your modified net profit.