Can Employer Make Me Take RMD at Retirement?
I will be between 70 and 70.5 when I retire. I am being told that I must take the first RMD when I retire in February. Since I’m retiring early in the year I would prefer to have the new plan administrator of the IRA Rollover to make that decision in December so that all my funds are transferred from the qualified employer retirement plan to the new plan administrator. Can an employer legally insist that I take my RMD at retirement? What if I move my retirement date to 2 months earlier (like Dec in the previous year)? I will still be between 70 and 70.5. (My birthday is in October.)
Permalink Submitted by mk foss on Sat, 2013-02-23 22:17
The rule for RMDs is that the first distribution in the year you attain age 70.5 must be the RMD. You would need to retire in the previous year to avoid the RMD requirement.
Permalink Submitted by Alan - IRA critic on Sun, 2013-02-24 04:35
The reason the plan is requiring your RMD distribution at the time of your retirement is likely to be your planned IRA rollover. However, if you retired in Feb and did NOT do an IRA rollover, your required beginning date is not until 4/1 of the following year. So if your only goal is to postpone the RMD as long as possible (usually not wise), postpone the IRA rollover as well. Sooner or later you will have to take the RMD, but that date is sooner if you do an IRA rollover, since your RMD cannot be included in the rollover.
Permalink Submitted by Chrys Zaglifa on Sun, 2013-02-24 21:41
To recap…..If I retire in Feb 2014 the RMD is taken right away. If I retire 2 months earlier in Dec 2013 I can roll over the funds to an IRA. The new plan sponsor will allow me to either take the RMD in Dec 2014 (advisible) or wait until April 1, 2015. If I choose the latter I will have to make 2 RMDs (April 1, 2015 and Dec 31, 2015). I attain 70.5 years April 2014. Does this sound right?
Permalink Submitted by Alan - IRA critic on Sun, 2013-02-24 22:09
Yes. If you do the IRA rollover before the year you reach 70.5, you can roll over the entire plan balance since no part of it is the RMD. The company you choose to hold your IRA is referred to as the IRA custodian. You are correct about the options you have with respect to your first RMD year (2014). In 2014 you can delay your RMD to 2015, take part of it or take all of it. The 2015 RMD must be taken by 12/31/2015.