403b rmd if over 70 1/2
client retired this year he was 71 this November 10th, 2012.
has IRA, which we know we have to take an RMD from prior to the end of 2012.
He also has a 403b.
question:
a. if he keeps the 403b, does he have to take an RMD for this year or can he wait until 75?
or
b. if he rolls over the 403b into an IRA does he have to take an RMD this year or can he wait till next year on this amount?
Thank you,
Douglas
Permalink Submitted by Alan Spross on Wed, 2012-11-14 00:46
He turned 70.5 in 2012, and therefore he must take his IRA RMD for 2012, but could opt to delay the distribution until 4/1/2013 if he wants. If so, two RMDs would be required in 2013.
For the 403b, 2012 also becomes an RMD year because he retired. The same options apply as for the IRA above. However, if he does an IRA rollover before year end, the 2012 RMD for the 403b must be distributed. For the age 75 provision, it only applies to the 12/31/1986 403b balance providing the plan tracked that balance. The 2012 RMD would be based on the 12/31/2011 403b balance less the 12/31/1986 balance.
Answers are therefore:
a) Part of 403b RMD can be deferred to 4/1/2013 and the rest to age 75
b) IRA rollover this year would require distribution of the 403b RMD other than the RMD on the 1986 balance. Once the funds are in the IRA, the age 75 option is erased and IRA RMD rules apply.
Permalink Submitted by george collins on Thu, 2012-11-15 19:15
[quote=”[email protected]“]He turned 70.5 in 2012, and therefore he must take his IRA RMD for 2012, but could opt to delay the distribution until 4/1/2013 if he wants. If so, two RMDs would be required in 2013.
For the 403b, 2012 also becomes an RMD year because he retired. The same options apply as for the IRA above. However, if he does an IRA rollover before year end, the 2012 RMD for the 403b must be distributed. For the age 75 provision, it only applies to the 12/31/1986 403b balance providing the plan tracked that balance. The 2012 RMD would be based on the 12/31/2011 403b balance less the 12/31/1986 balance.
Answers are therefore:
a) Part of 403b RMD can be deferred to 4/1/2013 and the rest to age 75
b) IRA rollover this year would require distribution of the 403b RMD other than the RMD on the 1986 balance. Once the funds are in the IRA, the age 75 option is erased and IRA RMD rules apply.[/quote]
Alan: I have a similar(delay distribution option). My question is what will be the two payments in the caryover year.?
My case;
70.5 on Feb 2016 MRD = 17k
Plus one year MRD = 19K
For estimation, Do I just add the two together ??
I also copied your reply from another post on a similar question–which I believe answers my question? [b]Alan’s quote in Bold
[/b]
[b]Tom is correct, except for the attained ages. The attained age for the 2012 RMD is the age on 12/31/2012 (71) and for 2013 the age on 12/31/2013 (72). But the account balances used to calculate those RMDs are the balances on the prior 12/31 dates (12/31/2011 for 2012 RMD and 12/31/2012 for the 2013 RMD.
The divisor is 26.5 for the 2012 RMD, whether taken out in 2012 or by 4/1/2013. Person will be 71 on 12/31/2012.
Divisor is 25.6 for the 2013 RMD based on age 72.
It’s possible that taking two RMDs in 2013 could either save on taxes or cost you more. Sometimes having no SS included in income in one year and 85% in another results in less total tax than having SS taxed in both years. It all depends on the amount of SS benefits and other income that exposes SS to inclusion in AGI. The only way to be sure is to run a model both ways using your best estimates. Of course, forecasting with all the expiring tax provisions is more difficult than usual.[/b]
jerry
Permalink Submitted by Alan Spross on Thu, 2012-11-15 22:28
jerry,
In your example, if you wanted to carry over the 2016 RMD of 17k, you would have to take out the 17k by 4/1/2017. And you would have to take out the 19k by 12/31/2017 resulting in two taxable RMDs in 2017. You are not limited to taking the entire 2016 RMD in 2016 or taking nothing, you could split the 2016 RMD of 17k in any combination between 2016 and 2017 prior to 4/1. That gives you some additional tax flexibility in those two years.
Also, when not taking the 2016 RMD in 2016, there is no longer any adjustment made to the 12/31/2016 balance for the amount you did not distribute in 2016. This makes the 2017 RMD around 4% larger than it would have been had the 2016 RMD been taken in 2016. An adjustment was required prior to 2002 under the old RMD Regs.
You would add the 17k to the 19k if you deferred the entire 2016 RMD, but of course you would not know the exact 19k amount until 12/31/2016.
Permalink Submitted by george collins on Fri, 2012-11-16 18:57
Alan , thanks again for your excellent explanations. 😀
Was also not aware of splitting the 2016 RMD over two years–giving me additional flexibility. 💡
I have an interesting situation in that 2016 is my 1st RMD, it is also the last year of a deferred comp income. By moving the 2016 RMD to 2017, I will not only drop one tax ladder but also stay below the Medicare 170K part B threshold.
Jerry
Permalink Submitted by Marc Gillespie on Fri, 2013-09-27 17:40
I Have a 74 yr old client who is still working and has a 403b and just rolled over $270k to an IRA. The question is if he has to to an RMD for 2013 since the IRA didn’t exist at the start of the year and he wouldn’t have had to take it from the 403b because he is still actively employed(and contributing) Thanks.Marc Gillespie
Permalink Submitted by Alan - IRA critic on Fri, 2013-09-27 18:10
Marc, he does not need to take an IRA RMD for the amount rolled over from the 403b, but of course he will have to take a 2014 RMD based on the 12/31/2013 IRA value.
Permalink Submitted by Peggy Fisher on Tue, 2013-10-01 14:57
Is it always asssumed the ownership of an IRA (any IRA ie inherited, RO, transfer etc.) is as of January 1st of the current year?Is this a rare case in which you can use the word “always”?