401k rollover to IRA to make charitable RMD rollover
I have a client who is a 5%+ owner in a business. He is 70 and will turn 70.5 in September 2016. The client would like to rollover his 401k balance to his IRA and then make a charitable contribution after September 2016 to a private operating foundation based on the combined IRA and 401k balance that was rolled into the IRA.
My question is, must he take his RMD from his 401k balance prior to the rollover to his IRA? He has not turned 70.5 yet. His desire is to move the 401k into his IRA and take the full RMD from the IRA so that he can maximize his charitable IRA rollover contribution. I think he needs to take the 401k RMD first. Thoughts?
Permalink Submitted by Alan - IRA critic on Tue, 2016-07-12 15:17
Yes, the RMD must be completed first, then any additional amounts can be rolled over. This requirement begins on Jan 1st of the year client reaches 70.5, therefore this last January. Therefore, his plan is not allowed. In addition, most private foundations are NOT eligible charities for a QCD. Neither are donor advised funds. Unless he already has an IRA balance, he therefore cannot do a QCD this year and would not have an IRA RMD this year. In other words, the 401k RMD must be issued from the 401k directly, and must also be done before any rollover is done. The 401k administrator should be aware of these requirements.