401k RMD / IRA RMD

Submitted by Gil Shifrin on Fri, 2017-05-12 14:14

I will be 70 1/2 this year. I will retire September of this year. I will execute the NUA from my company stock in January 2018. I will roll other monies from 401K to IRA in January 2018.
The RMD on the IRA for 2016 was 28,000. Will the executed NUA in 2018 (January) cover both 401K RMD for 2017 and the RMD for IRA in 2016 and 2017?



Submitted by Alan - IRA critic on Fri, 2017-05-12 17:18

If you are turning 70.5 this year there is no 2016 RMD for either plan. You will have no IRA RMD for 2017 unless you already had an IRA before this rollover because your IRA  had no balance on 12/31/2016 or 12/31/2017. Your first IRA RMD will be in 2018 using the 12/31/2017 balance. Your 2017 401k RMD is not due until 4/1/2018. If you do the lump sum distribution in January 2018, both your 2017 and 2018 401k RMDs will be credited by the NUA shares, both the cost basis and the NUA on those shares. That should allow the rest of the 401k balance to be fully rolled to your IRA since the employer shares should cover two years of plan RMDs unless the value of your employer shares is less than 8% of the plan balance.

Submitted by Gil Shifrin on Fri, 2017-05-12 17:40

I think I confused the situation by misstating the RMD that I will incur this year as RMD 2016. First I have another rollover IRA in a  brokerage account plus an IRA annuity with an insurance company.  I am required to pay 28,000 RMD by April 2018 .I am currently working and I will retire in September 2017. I will execute the NUA( in my 401K account for my company stock and move to taxable account. I will rollover the remainder of my monies in the 401K to an IRA account. Does the execution of the NUA (cost basis $100,000) meet all of my requirements (2017 and 2018). I hope I am clear.

Submitted by Alan - IRA critic on Fri, 2017-05-12 18:26

  • Yes, it does. You are smart to delay the lump sum distribution to 2018. That way, the employer shares will cover two years of 401k RMDs instead of just one year.
  • Your 2017 taxable income will then include 9 months of earnings, plus as much of your IRA RMD as you want to take in 2017
  • Your 2018 taxable income will include 100k of employer share cost basis (unless you made after tax contributions to the plan), the portion of your 2017 IRA RMD you deferred to 2018 and your 2018 IRA RMD

Add new comment

Log in or register to post comments

Sign up to receive The Slott Report each week