RMD for self employed 401(k) when client turns 70 1/2
If a client is self-employed and is still actively contributing to his 401(k) at the time he turns 70 1/2, does he have to take an RMD? It’s a solo 401(k), so no employees and operating as a sole proprietor. He has been making large Roth conversions each year but hitting the RMD mark will slow that down considerably (he is trying to convert enough to max out the 28% bracket each year). I wondered if no RMD was required and if he is still making contributions to his 401(k), why wouldn’t we roll the existing pre-tax IRA money into the 401(k) and convert from there if this kept us from having to do RMD’s going forward (assuming he continues to work and make 401k contributions which is his plan). There is no plan RMD in this case.
Permalink Submitted by Alan - IRA critic on Mon, 2014-12-15 19:54
He can continue the contributions, but also must take RMDs each year since he obviously is a 5% or greater owner. Starting on 1/1 of the year in which he reaches 70.5, he must also complete his full RMD before converting any additional amounts he wants to. Since RMDs will be required from both his IRA and his solo K, there is no RMD savings in rolling one of these plans into the other.