RMD Question

[Ian S]

2024 is my first year of RMD's and already I have an issue. In late November, as part of my account consolidation and simplification, I started the process to transfer an old university contributory retirement account to a Fidelity rollover IRA. This turned out to be much more of a pain than I expected and by the time everyone, including the university, signed off on the transfer forms and I got a medallion signature guarantee, the funds did not leave the existing retirement account until December 19. The funds - apparently sent by check - did not show up as received by Fidelity until yesterday but with today's date.


Fidelity has already calculated my RMD's for this year and it doesn't include the transferred funds for the calculation. Also, my records show that the transferring firm did not take out any RMD as it wouldn't be required since it was still 2023 when the funds were sent to Fidelity. So do I have Fidelity redo the RMD calculation or just do it myself and withdraw the calculated amount? Or do nothing?

 

[audreyh1]

Call them and discuss?

 

[REWahoo]

... just do it myself and withdraw the calculated amount?

This gets my vote. Seems the simplest and safest option.

 

[GrayHare]

Just calculate it yourself and withdraw that amount. The brokerages exclude themselves from liability for telling you the wrong RMD amount, anyhow.

 

[cathy63]

You bear the legal responsibility for correctly calculating and withdrawing your RMD, so you should always double-check the broker's math and do the calculation yourself anyway.

In this case, Fido will probably just tell you they can't redo the calculation since it's done automatically by the computer and the account had a $0 balance on 12/31.

 

[latexman]

Generally, a RMD is calculated for each account by dividing the prior December 31 balance of that IRA or retirement plan account by a life expectancy factor …

If the old university contributory retirement account and the Fidelity rollover IRA both had a $0 balance on 12-31-2023, it seems do nothing is a valid legal option too. So, you are in the cat birds seat and can do whichever you prefer. Calculate and withdraw it yourself, or do nothing. The former is the route with less risk of penalties.

 

[Sunset]

I would use the (end of year Fidelity value plus the value of the check) and use that total to figure out the RMD.

The penalties for the IRS thinking you are wrong are too severe to even give them an excuse.

 

[Souschef]

Just calculate it yourself and withdraw that amount. The brokerages exclude themselves from liability for telling you the wrong RMD amount, anyhow.

Exactly. My broker said my RMD was around $59K, but my calculations show it to be around $80K, confirmed by the IRS on line calculator.

 

[Sunset]

Exactly. My broker said my RMD was around $59K, but my calculations show it to be around $80K, confirmed by the IRS on line calculator.

This can easily happen if you have multiple IRA's or/401K's , and is guaranteed if they are in different brokerages.

But if it's one IRA at one brokerage, I'd look for a broker than can do math

 

[Ian S]

I will do the calculation on my own using the IRS table for my situation and I will include the amount involved in the transfer.

 

[SecondCor521]

What kind of "university contributory retirement account" was it?

 

[Ian S]

What kind of "university contributory retirement account" was it?

I believe it's a 401(a) optional retirement plan.

 

[SecondCor521]

I believe it's a 401(a) optional retirement plan.

Never heard of that term.

I'd call the university and ask them if RMDs are required on that type of plan.

If RMDs are not required, I'd just take the one that Fidelity calculated based on the balance on 12/31/2022.

If RMDs are required, I'd do more research. I don't know how in-flight retirement money is handled vis-a-vis RMDs. Logically adding the RMD for that check to the Fidelity number seems satisfactory.

 

[Souschef]

Exactly. My broker said my RMD was around $59K, but my calculations show it to be around $80K, confirmed by the IRS on line calculator.

I just checked tonight, and they fixed it.

 

[Ian S]

Never heard of that term.

I'd call the university and ask them if RMDs are required on that type of plan.

If RMDs are not required, I'd just take the one that Fidelity calculated based on the balance on 12/31/2022.

If RMDs are required, I'd do more research. I don't know how in-flight retirement money is handled vis-a-vis RMDs. Logically adding the RMD for that check to the Fidelity number seems satisfactory.

My understanding is that the 401(a) is similar to the 401(k) but for non-profits, governments and educational institutions. Because my contributions were pre-tax, I'm subject to the usual rules for distributions. When I was hired at the state university, I had to participate in either the state retirement system or this optional retirement plan. I chose the latter.

 

[DrRoy]

I will do the calculation on my own using the IRS table for my situation and I will include the amount involved in the transfer.

+1

 

[TrvlBug]

DH and I both worked for a not-for-profit company and participated in their 401(a) & 403(b) plans until they changed to the one bucket 401(k). 401(a) was the employee's contribution and 403(b) the company's contribution. Both pre-tax and subject to RMDs.