401-K RMDs

Submitted by R Shepherd on Mon, 2023-03-06 23:36

I have been taking RMDs from my IRAs for several years. I am working and contributing to an employer provided 401-K, which does not require an RMD, since I am still employed and do not own more than 5% of the stock of the company.

When I retire, the plan sponsor has informed me that, regardless of the date of the last day of employment, they will use the most recent 12-31 year-end 401-K balance and add any contributions made from 12-31 to my last day of employment in arriving at the balance used to calculate the RMD.

Assuming my last day of employment is 11-17-2023, using their guidance, the RMD would be calculated by adding the 12-31-2022 401-K balance to contributions made from 12-31-2022 to 11-17-2023.

Is this correct?

Would the RMD have to be taken by 12-31-2023?

If my last day of employment is 12-31-2023, when would my RMD have to be taken?



Submitted by Alan - IRA critic on Tue, 2023-03-07 00:57

  • It is NOT correct. Your 2023 RMD is based on your plan balance on 12/31/2022.  Your 2023 salary should not be added to that figure. 
  • Your required beginning date is 4/1/2024, therefore you could defer that RMD to 2024 unless you wanted to do a direct rollover to an IRA prior to year end 2023. If you defer, then you will have to take 2 RMDs in 2024.
  • If your last day of employment is 12/31 you are treated as retiring in 2023, not 2024. Your required beginning date will still be 4/1/2024. Since you are working most of 2023, depending on the amount of your salary and your RMD, your total tax bill for the 2 years will probably be lower if you spread your income about equally over those 2 years by managing when your 2023 RMD is distributed.

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