ASSUMPTIONS & QUESTIONS-RMDs, ROLLOVERS, ROTHS, AND QCDs

Submitted by star pollack on Thu, 2017-10-26 03:45

Assumptions (please correct me if in error)
1. Retired, I will take 1st RMD in 2018, reaching age of 70.5 in March 2018.
2. In 2017, will roll over all funds from 457 to new TIRA but convert as much as I can (and have cash to pay taxes on) to ROTH (without going up to next bracket).
3. In 2017, will roll over some funds from 403(b) to a separate TIRA (but not much since the 403(b) earns guaranteed 7%)
4. TIRA (from 457 funds) will provide source of QCD (offsetting part of RMD) in 2018, doing first QCD after I am 70.5.
5. Will continue to use that TIRA for QCDs each year.
6. Will start ROTH conversions from remaining 403(b) funds after first TIRA (from 457) is all converted to first ROTH IRA and-
7. Will continue to do rollovers to 2nd TIRA (from 403(b) account) ahead of QCD for each following year.
Questions:
1. Any flaws in this plan so far?
2. It seems to me that I DO need 2 separate TIRAS for the separate sources because I cannot aggregate RMDs from 403(b)s and 457s, so wouldn’t it need to be clear to IRS and my former employer where the funds for the TIRAS came from? Vanguard said it would be ok to rollover 403(b) and 457 funds into the same IRA.
3. I’m unclear as to where the actual RMD comes from- for 403(b)– is the amount in that account added to the amount in the TIRA, the RMD calculated and then I decide how to take it from the account and/or the TIRA?



Submitted by Alan - IRA critic on Thu, 2017-10-26 05:00

  1. No flaws, but remember that starting in 2018 you must also take the 403b RMD before doing a direct rollover.
  2. Vanguard is correct. You do not need 2 TIRA accounts since all 403b RMDs must come from that plan. Once the funds are in an IRA it does not matter where they came from with respect to RMD calculations. The IRS does not care either.
  3. The 403b is distributed to you by the plan each year based on the 403b prior year end balance. If you are doing a rollover from the 403b, the 403b RMD must be distributed to you first and you cannot roll over that RMD or any other RMD. Your Roth IRA is not subject to RMDs, but your TIRA RMD for years after the rollover will be increased because the rollover will cause the year end IRA balance to increase. 
  4. Note that if the plan messed up and somehow you rolled over to an IRA before taking out the 403b RMD, your 403b would still be deemed satisfied and would be taxable, but RMDs cannot be rolled over so you would have an excess IRA contribution to correct.

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