Moving IRA Into 401k to avoid RMD
If worker over age 72 has active RMD can they move their IRA into that employer 401k so there is no RMD on the balance? Provided 401k plan accepts?
If worker over age 72 has active RMD can they move their IRA into that employer 401k so there is no RMD on the balance? Provided 401k plan accepts?
Permalink Submitted by David Mertz on Wed, 2021-01-06 21:19
The RMD required for the traditional IRA for 2021 must be satisfied before any other amounts are rolled over from the IRA to the 401(k). The 2021 RMD for the IRA cannot be avoided because the first amounts distributed from the IRA in 2021 are RMD and therefore not eligible for rollover to the 401(k) (unless the RMD for this IRA has already been satisfied with a distribution from another of the individual’s traditional IRAs). With no funds in a traditional IRA at the end of 2021 as a result of the rollover, there will be no RMD for the traditional IRA for 2022.
Permalink Submitted by Bradley Bjerning on Thu, 2021-01-07 18:36
So if a person is over 72 with no earned income and their retirement investments are in a 401(k) or Roth IRA, i.e. no funds in a traditional IRA, will there be no RMD for that particular year?
Permalink Submitted by Alan - IRA critic on Thu, 2021-01-07 18:49
If there is no TIRA, there are no TIRA funds that can be rolled into the 401k and no IRA RMD. A Roth IRA cannot be rolled into any different type of plan and Roth IRAs do not have RMDs for owners. If you are just asking about 2020 RMDs, there are none. For 2021 RMDs, there will be one due on the 401k since the person is obviously no longer working there. The 2021 401k RMD is based on the 12/31/2020 year end value and there is no way to avoid the 2021 401k RMD.
Permalink Submitted by David Mertz on Thu, 2021-01-07 18:51
As long as there were no funds in a traditional IRA at the end of the previous, year there will be no RMD for an IRA and, as long as the person is still employed with the company providing the 401(k), no RMD from the 401(k) (unless the 401(k) plan has a plan-required RMD for all employees over a certain age, but that seems unlikely if the plan accepts rollovers made by those employees).
The 401(k) will be subject to RMDs for the year that the person separates from service with this employer and each year thereafter.