Owing to a checkered employment history, some questions in advance:
With multiple IRAs 401ks and SEPs, can I withdraw from just one account for the totaled required minimum distribution?
If so, do after-tax contributions just figure somehow into the computation of tax for the total, or just the ones for the account from which the withdrawal is made?
A question of how after-tax additional contributions are handled, and allocated to accounts, and to withdrawals.
No. Each 401(k) is required to calculate and distribute the RMD. All your traditional IRA accounts, including SEPs and SIMPLEs get lumped together for the calculation, then you're free to take your RMD from whatever account(s) you like.
Each 401(k) also has a lot of leeway in terms of what distribution methods are available, so you need to check them individually. You can always roll a 401(k) from a former employer into your traditional IRA before the year you reach 70 1/2.
All withdrawals wind up lumped on your return. You lump all traditional IRA accounts when calculating the taxable portion. If there are after-tax amounts in a 401(k) there are different rules depending on the type of distribution.
in article snipped-for-privacy@mindspring.com, Ron Hardin at snipped-for-privacy@mindspring.com wrote on 2/5/08 9:27 AM:
The best way to figure all this is with software. It happens on the form
8606 and its associated worksheets. IRAs are separate from retirement plans so you will have two distributions but all the plans of each type are aggregated together. That is why there is a little box on the 1099R to check if the distribution is from an IRA.
You put in the prior year end value of all the plans of each type. And that is the basis for calculating the RMD based on your age. The tax free part, if any is calculated by dividing the total amount of after tax contribution / the total value to get a fraction which is multiplied by the amount of the distribution. Example, After tax contributions of $10,000 in an account worth $100,000 will give you 10% of the distribution tax free.
IRAs work the same way but are calculated separately. If you roll your tax deferred large 401(k) balance into your IRA, you make the denominator of the fraction much larger and the tax free part of the annual distribution may shrink to a very small amount.
You can take the distribution from any one of the accounts or all of them. There is no requirement that it be done on a proportional basis but if you have both IRAs and non-IRAs, they must be handled separately. All freely provided advice guarantee correct or double your money back
One should not advise a taxpayer to lump all IRA accounts together to compute the MRD. It is quite possible that the taxpayer life expectancy for each IRA account is different. E.g, one IRA has a spouse who is more than 10 years younger as the sole beneficiary; one IRA has the taxpayer's child as a sole beneficiary; and a third IRA is a beneficiary IRA inherited from a parent. Three different tables would have to be used to compute the three MRDs. Then and only then, could the taxpayer make the decision as how one would like to take the total MRD.
IRAs don't have "joint & survivor" elections - so why would any beneficiary (beyond the original IRA holder himself) matter for MRD purposes? The beneficiary's LE only counts when he/she inherits the IRA.
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A point very well taken in case of different beneficiaries. I will even have to remember it next year when it's time to do my own calculations from multiples IRA's and different beneficiaries.
Even after one does the math, i.e separate calculations, he can then add them up, round up to nearest 100 (my opinion), and take the distribution from one of the IRA's. At least I hope so.
I think you may have missed my point. There are tables of life expectancy (see Appendix C of Pub 590). Table I Single Life Expectancy has the factors that must be used by a beneficiary of an IRA who has elected to take minimum distributions over their lifetime rather than emptying the account in five years. Table II Joint Life & Last Survivor has the factors that must be a taxpayer that has his spouse as a sole beneficiary and the spouse is more than 10 years younger than the taxpayer. Table III Uniform Lifetime has the factors for everyone else.
A taxpayer could very easily have more than one IRA requiring the use of more than one table. Therefore, I always caution everybody that asks about this, that you shouldn't say add them all up and calculate the MRD. You can only add them all up if every IRA falls into the same category.
Yes, I did miss that - because I'm used to people who have a SINGLE IRA account and don't have these complications. So much for the classical treatment by the IRS to treat all IRAs as one....
Separate out the IRAs for which you are the beneficiary from those to which you have yourself rolled into or contributed.
Since those IRAs you inherited as a bneficiary could have had an 8606 out on them, and you could have an 8606 for your contributory IRAs, the 8606s can be different. It goes without saying, which is why I'm saying it, that when you inherit an IRA you also inherit the 8606 attached to that IRA.
If you are unfortunate enough to have inherited from several different people, you could be multiple independent 8606s.
That means trying to coerce your software to produce multiple
8606s for the same taxpayer!
Think about how you would go about doing that.
Or maybe you have smart software and, if so, I'd like to see tax in a box match that.
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