RMD from 401k

Submitted by James Johnston on Mon, 2017-03-27 16:18

I have a client who is 71 and received his last pay check in January 2017. He is now retired and wants to know when he is required to take his RMD from the 401k. Because he was employed when he turned 70 1/2 he took his RMD from his IRA but not his 401k. Does he need to take his RMD from the 401k in 2017 or wait until 2018? If he waits will he be required to take 2 RMD in 2018? We have read the IRS 401k resource guide, but it is confusing.



Submitted by Alan - IRA critic on Mon, 2017-03-27 16:47

  • On what date did the employer consider him to be retired?  Date of last paycheck is not the determining factor. The year of retirement determines his first RMD distribution year and the deadline to distribute that RMD is 4/1 of the following year. In addition, if an IRA rollover is to be done, the plan will distribute his plan RMD at that time and not include it in the rollover. This means that if he retired in 2016, since he was 70.5 at year end 2016 would be his first RMD year and an IRA rollover done this year would require that the RMD for both years be distributed before that rollover.
  • If he retired in 2017, then 2017 will be his first RMD distribution year with the deadline being 4/1/2018. Again, an IRA rollover would require distribution of the 2017 RMD before the rollover. If client waits until 2018 to take his 2017 RMD, then he will have 2 RMDs to take in 2018.
  • An IRA rollover therefore eliminates the option to postpone RMDs as long as they otherwise might have.

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