Individual Roth 401(k) RMD

I have a client who turned age 70 1/2 this year. He is still working and has a Individual 401(k) and Individual Roth 401(k) Plan. These plans were established in 2013. I understand that he must begin taking his RMDs from both Plans. He did make 2015 contributions to both. Is there a penalty with the RMD from the Individual Roth 401(k) because the contributions did not start more than 5 years ago or is this an exempt situation?

Thanks in advance!



There is no exemption to non qualified Roth 401k distribution taxes. Earnings in the Roth 401k are pro rated with contributions (elective deferrals and IRRs if any) when distributed, including RMDs. There is no penalty, just ordinary income taxes on the portion attributed to earnings in the Roth 401k. The 1099R will show the taxable amount in Box 2a. These RMDs could be reduced by doing annual rollovers from the Roth 401k to the Roth IRA where there will be no RMDs. That will result in a lower year end balance on which the following year RMD is calculated.



Add new comment

Log in or register to post comments