401k RMD prior to IRA rollover
Dear Alan et al,
I have a client who turns 70 in March 2019 and 70.5 in September 2019. He has a $2.6MM 401(k) and he is a >5% owner in the company.
His 401(k) plan allows for an in-service rollover. My understanding is that if he wants to take a RMD this year (instead of deferring and taking two in 2020), he could take his 401(k) RMD of ~$94,890 and then roll the remaining balance over to an IRA.
My understanding is that even if he doesn’t want to take a RMD this year, he would still need to do this prior to rolling the remaining balance over to an IRA.
Does this sound correct to you?
Best,
Chris
Permalink Submitted by Alan - IRA critic on Thu, 2019-01-24 18:24
Chris, yes you have it correct. The in service rollover requires the RMD for the year of the rollover to be distributed and not included in the rollover. His total RMDs will be the same with or without the IRA rollovers, just a case of which retirement account distributes them. If he holds any highly appreciated employer shares in the 401k, he might have NUA potential. If so, he could keep the employer shares in the plan while rolling over other assets and then utilize NUA after retirement. The distribution of such shares at that time will also be credited against the 401k RMD for the year of the LSD.