401k rmd issue
In 2024 I rolled over 11500 from a 401k to an ira and also converted 25000 from 401k to Roth IRA and the rolled all the money in that ira to a second Roth IRA
I made no rmd prior to doing this as I expected to be covered by the still employed rule. But then I ceased to be an employee on 12/31 triggering a 2024 rmd requirement. I am treating the amounts rolled over and converted as rmd payments and I paid the balance of the 2024 rmd in 2025. The amounts rolled into the traditional ira and converted to Roth are therefore excess contributions. I withdrew the amounts in the traditional ira in 2024 and intend to withdraw the excess contributions to the Roth IRA with earnings added, from the second Roth IRA.
is this correct?
Permalink Submitted by Alan - IRA critic on Tue, 2025-03-11 22:43
Yes, the retirement resulted in that year being an RMD distribution year. Regardless of the 1099R issued from the plan, you must report the RMD portion of the rollover as a taxable distribution from the plan. The first dollars distributed from the plan are allocated to the RMD, so if that first distribution went to your TIRA, the TIRA is the account with an excess contribution that must be removed. If the TIRA rollover was done after the Roth rollover, then the Roth IRA received the excess contribution.
Perhaps the rollovers were only small partial amounts, but the RMD for the 401k should only be about 4% of the prior year end balance. Therefore, you need to compare the RMD with the amount of the rollovers to determine whether one or both IRAs have excess contributions.
Any gains included in the removal of excess are taxable in the year the RMD was rolled over which will be in 2024.
Too bad you did not make the retirement date in Jan, 2025 as a 2024 rollover would not have included any RMD dollars.