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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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tax question when i turn 70 in 1 1/2 its my understanding

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tax question when i turn 70 in 1 1/2 its my understanding i have to take some payment from my 401 and roth ira. how much do i have to take each year .


i have about 300K/yr income from other investments.  i have 300K in the 401 and 88K in the roth __which i would want to touch obviously.


what do i have to draw from my 401 at 70 and do i have to take anything in my roth. i'd  want to keep adding to the roth


Lev :

Hi and welcome to our site!
You are referred to RMD - minimum Required Distribution.
You are correct - that RMD is required fro 401`k plan - but not for Roth IRA.
RMD amount is determined separately for each year based on the account balance on the Dec 31 of previous year.

Lev :

You must generally start receiving distributions from your 401k by April 1 of the year following the year in which you reach age 70 1/2. The required minimum distribution for any year after the year you turn 70 1/2 must be made by December 31 of that later year.
Figure your required minimum distribution for each year by dividing the account balance as of the close of business on December 31 of the preceding year by the applicable distribution period or life expectancy.
For Uniform Lifetime table - see page 109 in this publication - http://www.irs.gov/pub/irs-pdf/p590.pdf
Please consider this illustration Example. Laura was born on October 1, 1941. She reaches age 70½ in 2012. Her required beginning date is April 1, 2013. As of December 31, 2011, her IRA account balance was $26,500. No rollover or recharacterization amounts were outstanding. Using Table III in Appendix C, the applicable distribution period for someone her age (71) is 26.5 years. Her required minimum distribution for 2012 is $1,000 ($26,500 ÷ 26.5). That amount is distributed to her on April 1, 2013.

Customer:

i will be 70 1/2 nov of '15,so i'd have to take a dist by apr 15th 2017. I will be 72 >>>> thats 25.6 dist period. my wife is 12 yrs younger then me . i will have over $300,000 in my IRA. so 300k/25.6 = $11,718.75 per year . is that about right ?

Customer:

presently i have 3 children a, bro & sis-in-law, and 3 of my 8 grandchildren over 18yrs old and i opened Roths for all and would fund from my 401. my 3 kids at 40 are all over 50K in thier roths. My goal iis to get monies out of my taxable 401 and into thier non-taxable roths. they all get gifts each year . I formed 2 FLP's online years ago and have gifted my 2 industrial bldgs worth

Customer:

over $3mil to my family. my 4% shs are the only voting shs. I have been a day trader for over 20 yrs (original member of PCFN -- now Etrade). i want the grandkids to have 50K in a roth by thier mid 20's. its going quite well. Someday I will turn them over to a good money manager in hopes of 10%/yr. they would all have over $333K in thier mid 40's and with the grace of God over $4mil by the time they are 66yrs old ----- all those moneys basically Obama proof (or his grandkids )

Lev :

You are required to take distributions from traditional IRA. However there is NO RMD fro a Roth IRA account.
So - you may but are not required to take distributions from your Roth IRA.

You may transfer the money from your 401k account to the Roth IRA - that transaction is classified as conversion. The amount you will convert - will generally be taxable - so if you plan such conversions - you may spread them over several years to avoid large taxable income and higher tax brackets in any single year.
As you will be 70 1/2 on Nov 15, 2015 - according to current laws - you will be required to have RMD for 2015. But only for your 401k plan and traditional IRA. You will determine the amount of RMD separately for each account.
You will need to use Uniform Lifetime tables for 2015 that are not available yet.
But assuming these tables would not change - we may use 2012 tables for estimates.
Because your wife is 12 yrs younger then you - we need to use Table II - started on page 95
The combination of your and your spouse ages will be 70 and 58 - Joint Life and Last Survivor Expectancy would be 28.8.
Assuming - you will have $300,000 in your 401k plan on Dec 31, 2014
Then your 2015 RMD amount would be $300,000 / 28.8 = $10,417.
You will be required to take that distribution before April 1, 2016.

Let me know if any clarification needed.
Please be sure that tables might slightly change - and actual percentage could be a little different.
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