Rolling over 401k to Avoid RMD
Have a client who is 76 years old and subject to RMD. He recently left his employer and wants to rollover his 401k into an IRA rollover. I know if we do this then the balance as of 12/31 will need to be included in his RMD calculation. However, if we leave the 401k at his previous employer or roll it into a rollover IRA and roll it into his new employer’s, he is going to continue to work, 401k before the 12/31 deadline, will we be able to avoid having to include this balance for him RMD calculation?
Permalink Submitted by Alan - IRA critic on Fri, 2015-01-23 15:55
What was the date of separation from recent employer? 2014 or 2015?
Permalink Submitted by Todd Martin on Sat, 2015-01-24 23:19
December 2014 was the date of seperation.
Permalink Submitted by Alan - IRA critic on Sat, 2015-01-24 23:49
The 2014 separation results in 2014 becoming the first RMD distribution year. Therefore, the 2014 RMD and the 2015 RMD will have to be distributed prior to or at the same time as an IRA or new 401k rollover and the 2014 RMD also needs to be distributed by 4/1/2015. The 2014 RMD will be based on the plan balance on 12/31/2013 and the 2015 RMD on the plan balance on 12/31/2014. However, after taking the 2014 and 2015 RMDs, the balance is rolled into the new employer’s plan, future RMDs will be avoided for years that he is still working at year end. Nothing can be done about the 2014 and 2015 RMDs.