I am in my early 70's and just retired at the end of April. I am rolling over my 401K into an existing IRA. I have been taking RMD's from my IRA for two years and have already taken my RMD for this year. I have not been required to take an RMD from the 401K while I continued to work. Do I need to take an RMD from the 401K money for my 2020 tax year or does it start in 2021?
RMD is based on the value of your IRA as of 12/31 of the prior year. So any RMD for 2020 was based on the value of the account on 12/31/2019 and the RMD for 2021 will be based on the account value on 12/31/2020. And of course RMD requirements were waived for 2020 and who knows what will happen for 2021. I actually took most of my RMD in early January before the waiver went into effect.
I have not been required to take an RMD from the 401K while I continued to work. Do I need to take an RMD from the 401K money for my 2020 tax year or does it start in 2021? All RMDs have been suspended for 2020, or you would have had to take one based on the 401(k) money. You will have to take an RMD in 2021 based on the balance in your IRA(s) as of Dec 31, 2020. Note that for someone who has multiple IRA accounts, whoever holds those accounts for them will report the balances of each one. Such a person would have to calculate the total RMD based on the total from all such accounts, but there is no requirement to withdraw the money proportionally from the different accounts. As long as the person meets the total RMD requirement it is their choice which accounts it comes from.
I have not been required to take an RMD from the 401K while I continued to work. Do I need to take an RMD from the 401K money for my 2020 tax year or does it start in 2021?As already mentioned, the requirement for RMDs in 2020 has been suspended due to the CARES Act, so you shouldn't need to take an RMD for 2020 from your 401(k). If the requirement had not been suspended, it would depend on your plan's rules. Some plans may say if you work even a day during 2020, you are considered to be an employee for that entire year, so you don't need to take an RMD. Others may require you to work a certain number of hours, or through a specific date in order to be an employee long enough to not be required to take an RMD. So you would have needed to ask that question of your plan administrator.That said, if you are rolling money over into an IRA, and the 401(k) required an RMD, the RMD would generally need to be paid out to you prior to any rollover. Again, your plan administrator should be able to answer that question for you.AJ
All RMDs have been suspended for 2020, or you would have had to take one based on the 401(k) money.Not necessarily. The plan may have rules that if someone works a certain number of hours, weeks, months or until a certain day during the year, they are considered an employee long enough to not be required to take an RMD. These type of rules are written so that an employee retiring as of, say, Dec 15, isn't required to try to take out an RMD before the end of the year. (Considering that it took a full month after I retired for everything to work it's way through the system so that I would be able to take a withdrawal from my 401(k), I would guess that most plans would have some sort of limit that ended no later than Nov 15 or so, but it could be as soon as Jan 2.) So it would depend entirely on the plan's rules.AJ
Thanks AJ. I will ask my 401K plan administrator.The reason I was asking about my 401K is that I was not required to take an RMD after age 70-1/2 while I was still employed. But I wasn't sure how retiring in April affected an RMD requirement for 2020.
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