Rollover IRA after age 70 1/2
I plan to work until the age 75 (I’m now 69) and understand that I can still contribute to the 401K plan of my current employer and take no RMDs at 70 1/2. I also have a ROITH IRA that can stay untouched for a while. I am now paying into ROTH IRA in my company instead of 401K.
However, what will happen to the Rollover IRA that contains 401K earnings from my previous employers? If that Rollover IRA has to start with RMDs after 70 1/2, which I don’t want, can I transfer these funds to a ROTH IRA after paying taxes? I did that in 2010 and probably should have transferred more.
What can I do to avoid additional income from Rollover IRA at age 71 and additional taxes?
Thanks,
M.
Permalink Submitted by Alan - IRA critic on Tue, 2014-12-02 22:51
If your current employer plan accepts IRA rollovers you could roll the TIRA into the pre tax portion of your 401k and eliminate RMDs until you retire. You must do this before 1/1 of the year you will reach 70.5 to eliminate the TIRA RMD for the year of the rollover. If you converted the TIRA to a Roth IRA instead, you would probably inflate your current tax rate even more, so rolling the TIRA into your current 401k is the best plan to reduce RMDs and taxable income at least until after you retire. Most people will be in a lower bracket then, although even if you are delaying SS benefits to 70, they will also start very soon.
Permalink Submitted by Marija Jovanovic on Thu, 2014-12-04 00:51
Very helpful answer.Just in case I cannot transfer old Rollover IRAs into the new plan: what else is available to postponbe these RMDs? Start a charity in my name and send money there? Just kidding.I never thought I will have to worry about too much $$ pouring in, and it’s really not too much just that timing is off.Regulators have to understand that people now work LONGER and adjust their numbers accordingly.Thanks,Marija
Permalink Submitted by Alan - IRA critic on Thu, 2014-12-04 01:19
No other options. If you are working after 70.5 and have IRAs that cannot be rolled into your employer plan, you will have to take the IRA RMDs. But due to this additional income, you could also increase retirement plan contributions to the employer plan which will reduce your other taxable income, somewhat offsetting the RMD taxes. Within the next few years the RMD divisors will likely be adjusted to reduce RMDs to reflect new mortality tables and longer life expectancies. This is already occurring within the pension plan area.
Permalink Submitted by David Fielding on Wed, 2017-05-31 21:28
If my IRA was rolled over into new employer plan in this year after 1/1 but before I turnnned 70 1/2 do I need to take an RMD this year? Do I need to take an IRA in each of all subsequent years until I retire?Thanks,Dave
Permalink Submitted by Alan - IRA critic on Wed, 2017-05-31 22:22
If you had not completed your 2017 RMD before rolling the IRA over to an employer plan, then the RMD portion of the rollover was not eligible for rollover and the employer plan should not have accepted it. The RMD amount will be taxable in 2017 and your employer plan will have to distribute the RMD back out to you. After this year you no longer have an IRA balance so there will not be more IRA RMDs until you again have an IRA balance. To totally postpone IRA RMDs you needed to roll the IRA over to the employer plan before the year you reach 70.5.
Permalink Submitted by Marija Jovanovic on Thu, 2017-07-20 20:51
In addition to working as a W2 employee and not having any contributions to an IRA or other retirement plans, I will have some 1099 income ($15000) in 2017. I would like to open a SIMPLE IRA and contribute all that income there, and probably next year too. That way, as I understand, I will pay taxes on the MRD (ca. $585) instead of on $15000. Is there any better way of taking these $15000 and not paying more taxes? My W2 income is around $120,000 -plus my SS is $36,000.Thanks, M.
Permalink Submitted by William Tuttle on Thu, 2017-07-20 22:05