Retirement tax questions

My thoughts.

 

1. I believe you must take an RMD from the 401k before the balance is rolled over to the private IRA.

2.  An RMD is required from a Roth 401k for tax year 2022.  Therefore, your plan correctly calculated the RMD amount.

3. The RMD could have been taken from either account; since it was taken from the Roth 401k account, it is non-taxable.  There's no taxable portion of the withdrawal because the required amount was all taken from the Roth side.

4. Then, you did a rollover of the Roth 401k to a Roth IRA, and the pre-tax 401k to a traditional IRA.  This is standard and not complicated or problematic.

 

Your questions:

1. This was one of the correct ways to take the RMD.  It could also have been taken exclusively from the pre-tax account, or split between the accounts. 

2. There is no way to put the money back into the Roth IRA and re-take the RMD from the pre-tax IRA.  Potentially, you could have reversed things if you were still enrolled in the 401k and you completed the reversal before December 31.  I have no idea if the plan can be held liable for performing the RMD and the rollovers in a way that had fewer tax advantages for you.

 

Remember that if you had taken the RMD entirely from the pre-tax IRA, you would be losing future growth in the pre-tax account, so the overall impact of taking the RMD from the after-tax account may not be as large as it seems.

 

If you want to have future tax-free withdrawals, you can do a conversion from the IRA to the Roth IRA.  However, you can't convert your RMD.  You need to take the RMD from the IRA, and then withdraw additional funds to convert.

 

Lastly, remember that withdrawals from the Roth IRA will not be qualified until 2026.  Unless you have a previous Roth IRA, and withdrawals from the Roth IRA before 2026 could be subject to income tax if you withdraw earnings.  

 

3. No correction is needed.  Because the entire amount was drawn from the after-tax account, no part is taxable. 

 

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