Still working, can we stop RMD?
My dad is 88 and has been taking RMD’s from his IRA for many years. He is also still working, collecting $200K+ annually on a 1099 for professional services. He has only recently allowed me to assist with finances. I see no reason why he should not set up a solo 401K and make maximum pre-tax and Roth contributions.
My question is how to handle the IRA and the RMD’s. Am I correct that as long as he is working full time, he does not need to take the RMDs? If so, is there a form or other procedure to make such change?
“88 is the new 68”
Permalink Submitted by Alan Spross on Mon, 2008-04-28 23:19
IRA RMDs must continue regardless of the working status of the owner. This also includes SEP and SIMPLE IRAs when the owner is still working beyond age 70.5.
Rolling the IRAs into a solo 401k plan will not work either because the solo 401k plan owner would obviously be more than a 5% owner and therefore RMDs would be required from the solo K plan as well at age 70.5.
Although his RMDs cannot be reduced, he can at lower his AGI somewhat by making pre tax contributions to the solo K plan even though RMDs for the following year would contemplate the added year end value in the plan. Roth contributions to the solo K would probably only make sense if he were trying to reduce his taxable estate for federal or state estate tax purposes.
Permalink Submitted by Linda Lawson on Mon, 2008-04-28 23:48
Thanks, we are looking for both income tax sheltering and estate tax planning, so a solo 401K looked like a fairly easy first step.