Roll over 401k to IRA for RMD reasons?

[explanade]

This article on VG suggests doing so:

https://vanguardblog.com/2017/02/15...eITV:030217:EDU:blog:slot1:MULT:RET:XX:210:XX

Of course, VG is trying to get people to roll over 401k funds to them anyways.

So do you roll over to an existing IRA account or a new one? Can you have more than one IRA account, either in one institution or in different institutions?

How would that work if you're rolling over 401k, with pretax money, over to a Roth IRA, which was built up with post-tax money?


But an RMD is based on a percentage of assets so making an RMD out of a 401k and an RMD out of a Roth IRA should be about the same as if you took an RMD after rolling over 401k into that Roth IRA?

 

[Brat]

Roths are not subject to RMDs and money withdrawn from them will not count toward your RMD.

The purpose of a RMD is so that IRS can tax the money that was deposited tax free.

 

[GrayHare]

So do you roll over to an existing IRA account or a new one?

Most people roll a 401k into a new IRA account thereby segregating the funds from their original IRA. In some states doing so affords that new IRA equivalent, and usually superior, protection from creditors that their 401k has.

 

[NW-Bound]

This article on VG suggests doing so:

https://vanguardblog.com/2017/02/15...eITV:030217:EDU:blog:slot1:MULT:RET:XX:210:XX

Of course, VG is trying to get people to roll over 401k funds to them anyways.

Consolidating into one account makes it easier to manage RMD. Else, you have to keep track of each account, and the withdrawal is different for IRA vs. 401k as the article describes.

So do you roll over to an existing IRA account or a new one? Can you have more than one IRA account, either in one institution or in different institutions?

Of course one can have multiple IRAs, and tracking them all is the complexity that the article discusses. It is possible to have multiple IRA accounts at one institution (there's a reason for that). I do have multiple IRAs at different institutions.

How would that work if you're rolling over 401k, with pretax money, over to a Roth IRA, which was built up with post-tax money?

Doing that means doing a Roth conversion, with a big tax bill coming due. Converting pre-tax money to post-tax means paying tax right now.

But an RMD is based on a percentage of assets so making an RMD out of a 401k and an RMD out of a Roth IRA should be about the same as if you took an RMD after rolling over 401k into that Roth IRA?

The owner of a Roth IRA, unlike a traditional IRA or 401k, is not subject to RMD. His non-spousal heirs will be.