RMD

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  • #32103
    Lilac
    Participant

    I have inherited IRA and 401k.
    Why do they calculate the RMD differently ? The IRA is calculated with Uniform Lifetime Table but the 401K was calculated with Actuarial Life Expectancy Factor which as a result I have to take more on RMD from 401K. Is this common ? Thank you.

    #32391
    Alan S.
    Participant

    If you inherited the IRA from your spouse and assumed ownership of it, the Uniform Table is used. But you cannot be treated as the owner of the inherited 401k and if you leave the inherited 401k in place, the single life table applies which produces a much larger RMD as % of account balance. If you are the surviving spouse you can do a direct rollover of the inherited IRA to your own IRA, and then the Uniform Table will apply.

    There are also other possible explanations. Are you the sole beneficiary of the 401k, and has the plan indicated that the “actuarial life expectancy” they refer to is derived from the Single Life table?

    #32561
    Lilac
    Participant

    Yes, I am the spouse and sole beneficiary .
    So I need to rollover this 401K to my own IRA and if I do it before I take the RMD , then I can take the RMD with the Uniform Life Table this year?

    Thank you.

    • This reply was modified 4 months, 1 week ago by Lilac.
    #32585
    Lilac
    Participant

    Yes, I am the spouse and sole beneficiary .
    So I need to rollover this 401K to my own IRA and if I do it before I take the RMD , then I can take the RMD with the Uniform Life Table this year?

    The plan didn’t mention about Single Life Table .

    Thank you.

    #32654
    Alan S.
    Participant

    No, but more info is needed. Did your spouse pass in 2021 or before 2021. What would spouse’s age be at the end of the year that he passed?

    #32686
    Lilac
    Participant

    He passed at the age of 78 on Dec 2018.
    This year I am 78.
    In 2019 the company still using his RMD with uniform life table which I took the RMD. In 2020 they changed it to Actuarial Life Expectancy Factor but since it was not required to take it, I didn’t pay attention to it and didn’t take the RMD.
    Now for 2021 I just noticed it, more than double the amount.

    Thanks Alan.

    #32866
    Alan S.
    Participant

    OK, if you do the direct rollover to your own IRA this year, the plan must distribute the 2021 inherited 401k RMD to you using the single life table based on your age as of 12/31/2021. The rest of the balance will be rolled over to your IRA, but you cannot avoid this higher 2021 beneficiary RMD from the 401k this final year. Would have been better to have rolled it over last year with no RMDs, and the lower Uniform table would apply to your 2021 IRA RMD.

    #32910
    Lilac
    Participant

    Thank you so much Alan.
    Another questions: Do I take the RMD first before I roll it over to my own IRA since the plan had to do it ?
    When is my deadline to roll it over ?

    #34205
    Alan S.
    Participant

    Yes. In an RMD year a qualified plan must distribute the RMD (and any prior RMDs) before rolling over the rest. This should be automatic, since RMDs are not eligible for rollover.

    There is no deadline for the spousal rollover. It can be done immediately after the plan accepts you as beneficiary, or 20 years later. But if you stick with the inherited 401k, your RMDs will be smaller and your own beneficiaries will not be able to be treated as designated beneficiaries, only as successor beneficiaries to you.

    Therefore, as soon as there is no benefit from keeping the account as inherited, it should be rolled over to your own IRA. The only benefit you might have now is familiarity with dealing with the plan administrator, but most IRA custodians can provide you with any assistance you need.

    #34217
    Lilac
    Participant

    Thank you so much Alan.
    I talked to the plan administrator and you were absolutely right. I will take the RMD and transfer the remaining 401K to my own IRA.
    Again, appreciate your help.

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