Can an IRA Distribution Cover My 403(b) RMD? | Ed Slott and Company, LLC

Can an IRA Distribution Cover My 403(b) RMD?

ed slott IRA questions

By Joe Cicchinelli and Beverly DeVeny
Follow Me on Twitter: @theslottreport

In this week's Slott Report Mailbag, we answer questions on if you can cover your employer plan RMD (required minimum distribution) with an IRA distribution, the rules governing 401(k)-to-IRA rollovers and the logistics of setting up your IRA for three beneficiaries. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. You can find one in your area here.

1.

Can I take a distribution from one of my IRAs to cover the RMD in my 403(b) or does the RMD from my 403(b) have to come out of my 403(b)?

Answer:
Your 403(b) RMD must come out of your 403(b) plan. Your IRA RMDs cannot be used to satisfy your 403(b) RMD, or vice versa. However, if you have more than one 403(b) plan, you can add together those RMDs and take a total distribution from one or a combination of your 403(b)s.

2.

I worked for a company and left it about 10 years ago. At the time, I had a 401(k) that had a balance of approximately $250,000. At the time, I chose not to roll it over into an IRA Rollover. Seven years ago, that employer re-hired me, and I was and am today, a participant in a new 401(k) profit sharing plan in which my employer has made matching contributions into this plan (the new one only). Can I, at this time, roll over that original $250,000 into an IRA Rollover?

Answer:
It depends on the terms of the plan. You should ask the plan administrator of your employer what, if any, options you have with respect to your prior 401(k) balance.

3.

My 3 sons are beneficiaries of my IRA. If I die how is the IRA distributed to them? As 3 separate IRA accounts? I read that the Supreme Court just ruled that such IRA inheritances are no longer IRA accounts, and that leaving the IRA to a trust would be better in many cases.

Answer:
After you die, your IRA should be split into three separate inherited IRAs, one for each beneficiary. The Supreme Court did not rule that those inherited IRAs are no longer IRAs; it ruled that they are not protected as IRAs in bankruptcy. They are still inherited IRAs for all other purposes. Naming a trust as the beneficiary of your IRA can shield the IRA from your sons’ creditors. However, you should speak with an experienced attorney before naming a trust as your IRA beneficiary.

 

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