RMD questions and calculations

Question 2: The rule is that you can take all the IRA RMDs out of one of your IRAs (or out of some of them, or out of all of them) but you can't do that with the other pension accounts, the ones that I can't just put a name on right now. Absolutely, a rule invented by tax techno-nerds (assisted by *actuaries*) at some time way back in the last century. ERISA = Every Ridiculous Idea Since Adam.

I don't want to address your first question cuz I'm not a guru in this area.

There is massive reading involved in coping with this area, and you'll need to spend some time in the books to get comfortable with the answers. Meantime, get those real estate taxes paid and avoid the foreclosure.

RMDs from IRAs (Traditional, SEP & SIMPLE) are calculated for each account. You can then aggregate the RMDs and take it from any of those IRA accounts. The reason you should practice calculating the RMD by account before aggregating is that certain IRA accounts use different life expectancy tables. E.g., an inherited IRA uses a different table then what you would use for a traditional IRA you owned with your spouse who is 10 years younger or less. If all your IRA accounts were using the same life expectancy table, then Yes you could add up the year-end balances and divide by the life expectancy factor to arrive at the aggregate RMD.

Employer plans require that you take the RMD from that employer plan. An exception exists for 403(b) plans. For 403(b) plans, after calculating each employer's plan RMD, you are allowed to take the amount in any manner you desire from those 403(b) plans.

Lastly, you are not required to take an RMD from an employer plan if you still are employed by that employer and you own less than 5% of the company.

Alan's answer nailed it except for one ambiguity.

An inherited IRA stands alone. It's not part of the mix of IRAs for which you add up the RMDs and take the withdrawal from where you wish. The inherited IRA has its own RMD and its own computation, which actually starts the year after it's inherited.

If at any point, you find that you are not fully using up your 12% bracket (Taxable income of less than $38,700 single/ $77,400 married) you can consider a Roth conversion. This would let you take advantage of the low bracket and avoid having RMDs snowball as you get older. Of course, if you want/need the cash, you can withdraw more than the RMD number, and just keep liquid.

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Thank you so much. That is really helpful information.

I have no inherited IRA's, and I am single so I do not have any IRA's that are jointly owned with a spouse etc. That eliminates some of those variables in my case.

The information about there being no requirement to take an RMD from an employer plan if I am still employed and I own less than 5% of the company is very interesting. I do have employer plans with two companies where I still work and I have no ownership interest in either company. I assume that means that I do no have to take any RMD from either one until I leave my employment.

That leaves me with a somewhat unique set of circumstances which raises some additional follow-up questions for me. But, before posting those specific questions, I want to take a look at what types of accounts I have, where I have them, and the rough amounts of money/assets in each one. Then I'll post back with the new questions that I have.

I think the problem for me may be that I have two main types of accounts: 1) employer plans where I am still employed; and, 2) a Self-Directed IRA account that owns two properties (real estate) which would make taking any RMD money out in the form of cash difficult.

Again, I'll post back with more clarification and the questions that raises for me in terms of getting RMD money out quickly to pay (redeem) the tax lien certificates.

I have employer plans with two employers where I still work (I will be 70

1/2 in 2018). Those plans have an overall total of about 600K in them. I assume that since I still work at both employers, no RMD is required until I leave either or both jobs.

I also have a self-directed traditional IRA that I set up on my own and not through an employer, and that IRA has about 340K in it. However, that self-directed IRA has contains all of its funds in the form of shares in an LLC that owns two real estate properties. There is virtually no cash in that self-directed traditional IRA -- just real estate assets.

My calculation is that I will need to do an RMD this year from the self-directed IRA in the amount of roughly $12,500 +/-.

Since I cannot take a distribution from the self-directed traditional IRA in the form of cash without selling one or more properties, can I take a $12,500 cash distribution from one of my employer plans and have that count toward my RMD from the self-directed traditional IRA?

My gut was to say that you should take the RMD "in kind", i.e. the asset ownership changes to reflect an undivided X% is now non-IRA, and the rest remains in the IRA. A bit of paperwork, but a legit way to do this, as you claim the value and would be taxed on it. Of course, I need to offer some backup -

This article is from a member of Ed Slott's team. Any IRA pro who does know the name Ed Slott is not a pro, and I trust what he writes or posts on his site.

The direct answer to your question is "No." That said, there is nothing in the law that prevents a partial rollover from a 401(k) plan to an IRA by an active employee. However, it is rare that you will find an employer plan with that option in the plan document. Ask your employer(s) if that option exists.

Thanks Joe. That's very helpful and it may turn out to be a good way for me to do the RMD's from the self-directed traditional IRA that I previously set up, and which is enitely made up of illiquid assets (real estate). That would solve the RMD issue. The only downside for me is that I would not end up with any useable cash as a result of the transaction. But, it's still a good idea as far as me needing to meet the RMD requirement for that IRA.

Thanks Alan. That's an interesting idea. As it turns out, that's how I created the self-directed traditional IRA in the first place -- I did a partial rollover from my employer plan (a SEP, a 403(b), or both -- I don't remember which). My employer plan allowed me to do that. Then I used that self-directed traditional IRA to purchase real estate investment properties.