First time RMD and 401k RMD
I have a client who’s DOB is 7-2-48. He has an IRA and 401k, and he also is full time working but will retire May 1. Last year he should have taken his first RMD from his IRA by April 1, and then his second by Dec. 31, since he did not take it in 2019 because of his birth date. Because of the Cares Act, he did not have to take either of them last year.
My first question is will he only have to take one RMD from his IRA this year and does he have all year to take it?
Second question: He will retire May1, and will roll his 401k into his IRA. Is he required to take a RMD off of this 401k this year?
Permalink Submitted by Alan - IRA critic on Thu, 2021-02-11 18:32
You are correct that this client actually ended up with two years of IRA RMDs waived since his RBD was in 2020 and he deferred 2019. But his IRA RBD date remains in 2020, therefore he must complete his 2021 RMD by 12/31/2021.
While his 401k RBD will be 4/1/2022, because of the IRA rollover, the 2021 401k RMD must be distributed prior to the rollover. If he postponed the rollover until 2022, the two years of RMD would have to be distributed prior to 2022 rollover.
If he worked a long time for the current company, he should consider any NUA potential for any highly appreciated employer shares. If he did the LSD next year, he could apply any NUA cost basis and the NUA itself to cover the 2021 and 2022 RMDs. This is a unique opportunity if all the parts fit.