Rolling IRA Money into a 401(k) to Avoid RMDThis is a somewhat narrow slice of folks, but as the population and workforce ages, there are bound to be people that this will be available to. Here’s how it works:
If you are age 70½ or older and you have an IRA, you will be required to take a distribution from your IRA each year. However, if you are still working and have a 401(k) plan available to you, you can avoid having to take these RMDs until the year that you retire. If your 401(k) plan allows it (and today most plans do), you can rollover your IRA account into your 401(k) plan.
This is possible because 401(k) plans (and other Qualified Retirement Plans such as a 403(b) or a 457) don’t require you to start RMDs while you are still working.
So, if you don’t need the RMDs to live off of, you can eliminate the requirement by rolling over those funds into your 401(k) plan – and then begin taking RMDs upon your retirement. At that point you can also roll the funds back into an IRA as you see fit.
Of course, this shouldn’t be the only factor that you consider – you should also look at the inherent costs in your 401(k) plan, along with your investment choices and any plan-specific issues that may cause a problem for you with the rollover. In general though, this is a pretty good move for folks who happen to fit the criteria.
One last thing – if you happen to own the company that you work for (or own 5% or more of it), you can’t roll your IRA money into that company’s 401(k) plan. It’s just one of those IRS things…
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