Rollover this year, NUA next year?
I have a client that recently retired. He has stock in his 401k that we would like to utilize the NUA distribution, however for tax purposes as a result of earned income year-to-date, we would be better served waiting til Jan of 2023 to do the NUA distribution 12% vs 22% tax bracket on the basis distribution.
My question is, can you rollover all the other funds in the 401k this year and leave the stock in the 401k until next and then do the NUA distribution?
Thanks!
Permalink Submitted by Alan - IRA critic on Sun, 2022-05-08 17:24
Not unless client will turn 59.5 very soon. The current triggering event is the separation from service. A qualified LSD for NUA purposes must be done without an intervening distribution between the triggering event and the LSD year. Rolling over the other funds would be an intervening distribution if done this year, but could be done next year since next year is the LSD year. However, if reaching 59.5 becomes a new triggering event next year, the IRA rollover could be done this year, and the LSD done next year after reaching 59.5. When does client reach 59.5?
Permalink Submitted by Brian Bishop on Tue, 2022-05-10 19:32
The client is already 70 and retired. So, would he be able to rollover funds in the 401k this year and do the NUA distribution in January of 2023? Thanks.
Permalink Submitted by Brian Bishop on Mon, 2022-05-09 14:04
Alan, thanks for the response. The client is 70 this year and retired at the end of March.