RMD calculation for combined 401K and Roth 401K

[Nancy_73]

I am several years away from RMDs but for planning purposes I would like to know if the RMD calculation is based on the entire amount in my 401K or just the portion that isn't Roth?   I read somewhere that the rules change in 2024 and RMD will no longer apply to the Roth portion, is that true?

Also, what form will be needed to have an RMD go directly to a charity or charities in order to avoid tax implications?

[OCrawford]

@Nancy_73 

When do I take my first RMD (the required beginning date)?

You must take your first RMD by April 1 of the year following the year in which you turn 72 (70 ½ if  you reach 70 ½ before January 1, 2020) regardless of whether you are still employed.

April 1 of the year following the later of the year you turn 72 (70 ½ if you reach 70 ½ before January 1, 2020) or the year you retire (if allowed by your plan). If you are a 5% owner, you must start RMDs by April 1 of the year following the year you turn 72 (70 ½ if you reach 70 ½ before January 1, 2020).

[Holly W1 · Accepted solution]

Hello @Nancy_73 

Thank you so much for participating today!  We are so happy that you are here.

When it it is time to calculate your RMD, it will be based off each plan individually, so if you have a 401k and a Traditional IRA, each account will need to be calculated for the RMD.  

Beginning in 2023, the SECURE 2.0 Act raised the age that you must begin taking RMDs to age 73. If you reach age 72 in 2023, the required beginning date for your first RMD is April 1, 2025, for 2024. Notice 2023-23PDF permits financial institutions to notify IRA owners no later than April 28, 2023, that no RMD is required for 2023.

If you reach age 73 in 2023, you were 72 in 2022 and subject to the age 72 RMD rule in effect for 2022.

If you reach age 72 in 2022,

• Your first RMD is due by April 1, 2023, based on your account balance on December 31, 2021, and
• Your second RMD is due by December 31, 2023, based on your account balance on December 31, 2022.

Roth IRAs do not require withdrawals until after the death of the owner. Designated Roth accounts in a 401(k) or 403(b) plan are subject to the RMD rules for 2022 and 2023. However, for 2024 and later years, RMDs are no longer required from designated Roth accounts. You must still take RMDs from designated Roth accounts for 2023, including those with a required beginning date of April 1, 2024.

• You can withdraw more than the minimum required amount.
• Your withdrawals are included in taxable income except for any part that was already taxed (your basis) or that can be received tax-free (such as qualified distributions from designated Roth accounts).

As for the RMD to go to a charity, you will need to arrange that with the holder of the Account and set it up to be transferred to the charity of your choosing.  In order for the RMD to be non taxable, it has to be from a traditional IRA.    You can't make a QCD directly from your 401(k), but you can roll over your funds to an IRA and then make a donation.

Here are the sources i used to answer your questions:
https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs#:~:... 

https://www.investopedia.com/401k-qualified-charitable-donations-5496251#:~:text=You%20don't%20pay%2... 

Again, thank you for participating today!  If you have any further questions, please let me know!

Cheers!
Holly W

[dmertz]

Regarding a rollover from the 401(k) to a traditional IRA to be able to make a QCD from the IRA, any RMD for the year for the 401(k) must be completed before rolling over any other amount from the 401(k) to an IRA.  If you have separated from service from the employer providing the 401(k), you might want to do a rollover to an IRA before the year you reach age 73.