“Still Working” Exception: In-service Rollover to New IRA
Client is age 76 and still working. The 401(k) plan allows “still working” contributions past age 70 1/2, as well as in-service withdrawals/rollovers after 59 1/2. Client presently has NO other retirement accounts (IRA’s, etc.). Client wishes to keep working to age 78, open a new IRA (traditional) in 2020, and rollover assets from the 401(k) to the new IRA. Original RBD was April 1, 2015. Will the RBD be April 1st of 2021 (since the IRA did not exist prior to 2020) or does the client need to take a distribution from the new IRA based on Uniform Life Expectancy Tables for age 70 1/2, i.e. retroactively?
Permalink Submitted by Alan - IRA critic on Mon, 2020-02-10 23:02
The IRA RBD will be 12/31/21 because his first IRA year end balance will not be until 12/31/2020. For IRA owners, the only possible April RBD date is in the year following the 70.5 year, but if there is no IRA balance then, the actual RBD date will be on the first 12/31 following the year with the first year end IRA balance. There are no retroactive RMDs for the IRA. Note that rolling out of the plan prior to the retirement year will expose the amount rolled to an IRA to RMDs sooner than if the balance remained in the employer plan. In fact, some people will roll their IRAs into the employer plan to suspend IRA RMDs until after retirement.