I’ve been hearing recently from readers with some tricky questions about required minimum distributions. These are the mandatory withdrawals that savers over 70½ must take from traditional IRAs, 401(k)s and other retirement accounts by December 31. (The exception: You have until April 1 of the year after you turn 70½ to take your first mandatory withdrawal.) With just days until the RMD deadline, here are answers to some of those questions.
[Question2]I am age 73 and have been taking my RMDs from my 401(k) plan at a university where I was employed until 1993. This year, I returned to the same university, where I am now considered to be an active employee. Can I stop taking my RMDs from the university’s 401(k) since I’m working there again?
[Question2End]
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Answer: Let your 401(k) administrator know about your situation, but you’ll probably have to continue taking your RMDs. Even though you generally don’t have to start taking RMDs from your current employer’s 401(k) while you’re still working (unless you own more than 5% of the company), the rules aren’t as clear about what happens if you already started taking RMDs and then were rehired by the company several years later.
“The IRS regulations are silent about whether required minimum distributions stop when a participant is rehired by the employer that sponsors his or her 401(k) plan,” says Michael Weddell, director of retirement for Willis Towers Watson, a benefits consulting firm. “Given that there are no provisions for stopping the payments, we believe the safest course of action is to keep receiving the annual distributions.”
Whether you’re working or not, you still have to take RMDs at age 70½ from your traditional IRAs and any 401(k)s you have with former employers.
[Question2]May a qualified charitable distribution be made from a solo 401(k) plan?
[Question2End]
Answer: No. If you��re over 70½, you can transfer up to $100,000 each year tax-free from your IRA to charity, which counts as your required minimum distribution but isn’t included in your adjusted gross income. But that “qualified charitable distribution” only counts for IRAs, not for 401(k)s – and not for solo 401(k)s, either.[Question2End]
[Question2]Do I have to take RMDs from a tax-free Roth 401(k)?
[Question2End]
Answer: Yes. The required minimum distribution amount is based on your entire 401(k) balance, including any designated Roth accounts, says Weddell. That’s different from the rules for Roth IRAs. Even though you have to take RMDs from Roth 401(k)s, though, the withdrawals are not taxable.
[Question2End]
-
Here's How To Get Organized And Work For YourselfWhether you’re looking for a side gig or planning to start your own business, it has never been easier to strike out on your own. Here is our guide to navigating working for yourself.
-
How to Manage Risk With Diversification"Don't put all your eggs in one basket" means different things to different investors. Here's how to manage your risk with portfolio diversification.
-
Getting Out of an RMD Penaltyretirement When your brokerage firm miscalculates your required minimum distributions, you have recourse.
-
Borrowers Get More Time to Repay 401(k) Loans
retirement If you leave your job while you have an outstanding 401(k) loan, Uncle Sam now gives you extra time to repay it -- thanks to the new tax law.
-
It’s Not Too Late to Boost Retirement Savings for 2018
retirement Some retirement accounts will accept contributions for 2018 up until the April tax deadline.
-
How to Correct a Mistake on Your RMDs from IRAsretirement If you didn't take out the correct required minimum distribution because your brokerage firm made a mistake, the IRS may show some leniency.
-
Ways to Spend Your Flexible Spending Account Money by March 15 Deadline
spending Many workers will be hitting the drugstore in the next few days to use up leftover flexible spending account money from 2018 so they don’t lose it.
-
Making the Most of a Health Savings Account Once You Turn Age 65
Making Your Money Last You’ll face a stiff penalty and taxes if you tap your health savings account for non-medical expenses before the age of 65. After that, the rules change.
-
Reporting Charitable IRA Distributions on Tax Returns Can Be Confusing
IRAs Taxpayers need to be careful when reporting charitable gifts from their IRA on their tax returns, or they may end up overpaying Uncle Sam.
-
When You Can Expect to Receive Your Tax Refund
taxes The quickest way to receive your tax refund is to file electronically and have the money directly deposited into your bank account.
