RMD Requirement
Hello-
Client age 74 (born in 1948) has two 401ks:
– 401k from Company A from a previous employer that they have been taking RMDs from.
– 401k from Company B that they were employed at until 2/1/22 that they have not been taking RMDs since they were working there.
Now that they are no longer working at Company B, do they have the option of waiting to take the RMD from the 401k at Company B until the first few months of 2023? In other words, take two RMDs in 2023?
Thank you!
Permalink Submitted by Alan - IRA critic on Thu, 2022-04-28 00:29
Yes, while 2022 is the first RMD distribution year for the Co B plan, the 2022 RMD can be delayed in whole or in part to 4/1/2023, but that would result in 2 RMDs taxable in 2023 plus the RMD for Co A. Usually, that isn’t the best choice but individual taxable income patterns could change that. Further, since they only worked 1 month in 2022, the salary income will be low, and that makes it more likely taking the RMD this year will better equalize income. It would be different if client worked until late in the year since that would increase taxable income this year without the RMD to add to it.
Permalink Submitted by Treavor Dodsworth on Thu, 2022-04-28 19:37
Thank you! This individual received a large separation payment as well as one month’s earnings which is pushing up his taxable income this year.
Permalink Submitted by Alan - IRA critic on Thu, 2022-04-28 21:40
There is still considerable flexibility because he can is not limited to an all or nothing choice for the 2022 RMD. He can take any partial portion he wishes and defer the rest to 2023, with the goal of equalizing taxable income between those years.