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I'm turning 70-1/2 on May of this year. I read that I could defer drawing RMD until April of next year but I was told by my investment counselor that even if I wait until April 2013 to start my withdrawal, I still have to withraw my RMD for 2012 and my RMD also for 2013 which will increase our earned income in 2013. Is this accurate? Would I still be able to contribute to my 401K while im drawing my RMD? If so how much or is it the same $6,000.00 max for people over 50? What would be some of the good investment to place my RMD? Annuity is notin my plan. I Appreciate all the help and advice from you. Thank you in advance.

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It is not clear from your post if you are talking about RMDs from your current 401K or from other plans.
http://401krollover-ira.com/401k-rmd-still-working.html

--edit, I assume you are talking about an IRA.

Nikko222 said:   I'm turning 70-1/2 on May of this year. I read that I could defer drawing RMD until April of next year but I was told by my investment counselor that even if I wait until April 2013 to start my withdrawal, I still have to withraw my RMD for 2012 and my RMD also for 2013 which will increase our earned income in 2013. Is this accurate?

Distributions are included on your taxes during the year you process the distribution, so this is correct.


Would I still be able to contribute to my 401K while im drawing my RMD? If so how much or is it the same $6,000.00 max for people over 50? What would be some of the good investment to place my RMD? Annuity is notin my plan. I Appreciate all the help and advice from you. Thank you in advance.

You can still contribute to a 401k if you are eligible (still working, eligible for plan).

If you aren't going to use the money. Consider simply purchasing a similar asset in a taxable account, or shifting your tax advantaged holdings around a bit so you can purchase a tax efficient asset in a taxable account.

Nikko222 said:   What would be some of the good investment to place my RMD?

If your anticipated RMD is held in cash in a brokerage IRA, you might as well withdraw that amount immediately, since it's presently earning zero interest (or just about). To answer "which investment" requires knowing the purposes of the money, e.g. how much income you need or desire, if you are planning an inheritance, etc.

Nikko222 said:   Would I still be able to contribute to my 401K while im drawing my RMD? If so how much or is it the same $6,000.00 max for people over 50? .You seem to be confusing IRA limits with 401k limits

The tax advantaged maximum amount 401k contribution for over 50 is $22,500 for 2012. This does not include the corporate match if any

Further your plan my allow additional non-tax advantaged contributions. Again, these are 401k numbers

How long do you plan to continue working? If you are planning to retire next year and will have lower income it may make sense to delay your first RMD until next year so that you can take advantage of having lower income. If that's not the case, I would go ahead and take the RMD this year so that you don't create additional income next year.

As far as your 401(k), you do not need to begin taking distributions on that until you stop working (unless you are > 5% owner in the company sponsoring the plan). You may continue to contribute--the post above is correct, the max is $22,500--not $6k (that's an IRA).

What to do with the $? H&B! No, maybe you should skip the B at your age and just stick with H&V(iagra).

kaneohe said:   It is not clear from your post if you are talking about RMDs from your current 401K or from other plans.
http://401krollover-ira.com/401k-rmd-still-working.html


Sorry, RMD from my existing traditional 401K. Thank you.

Bobalude said:   --edit, I assume you are talking about an IRA.

Nikko222 said:   I'm turning 70-1/2 on May of this year. I read that I could defer drawing RMD until April of next year but I was told by my investment counselor that even if I wait until April 2013 to start my withdrawal, I still have to withraw my RMD for 2012 and my RMD also for 2013 which will increase our earned income in 2013. Is this accurate?

Distributions are included on your taxes during the year you process the distribution, so this is correct.


Would I still be able to contribute to my 401K while im drawing my RMD? If so how much or is it the same $6,000.00 max for people over 50? What would be some of the good investment to place my RMD? Annuity is notin my plan. I Appreciate all the help and advice from you. Thank you in advance.

You can still contribute to a 401k if you are eligible (still working, eligible for plan).

If you aren't going to use the money. Consider simply purchasing a similar asset in a taxable account, or shifting your tax advantaged holdings around a bit so you can purchase a tax efficient asset in a taxable account.

Yes, I'm talking about traditional IRA. Thank you.

raringvt said:   How long do you plan to continue working? If you are planning to retire next year and will have lower income it may make sense to delay your first RMD until next year so that you can take advantage of having lower income. If that's not the case, I would go ahead and take the RMD this year so that you don't create additional income next year.

As far as your 401(k), you do not need to begin taking distributions on that until you stop working (unless you are > 5% owner in the company sponsoring the plan). You may continue to contribute--the post above is correct, the max is $22,500--not $6k (that's an IRA).

What to do with the $? H&B! No, maybe you should skip the B at your age and just stick with H&V(iagra).


Nice suggestion about Viagra. Don't you need a prescription for that? Anyway, I'm planning to work for another 3 yrs before retirement. Frankly, I don't really have a lot of hobby so my job is one of the few hobby I have. I have a traditional IRA in one of the Vanguard Mutual Funds. Thank you.

Nikko222 said:   I'm turning 70-1/2 on May of this year. I read that I could defer drawing RMD until April of next year but I was told by my investment counselor that even if I wait until April 2013 to start my withdrawal, I still have to withraw my RMD for 2012 and my RMD also for 2013 which will increase our earned income in 2013. Is this accurate? Would I still be able to contribute to my 401K while im drawing my RMD? If so how much or is it the same $6,000.00 max for people over 50? What would be some of the good investment to place my RMD? Annuity is notin my plan. I Appreciate all the help and advice from you. Thank you in advance.

Many older people are continuing to work beyond the traditional retirement age. You can defer the first IRA RMD when you reach 70.5 years of age to the following year if you want (this only applies to the very first distribution). That then makes the distribution reportable under the following year on your tax return. In your case, that would be 2013. 401(k) contribution eligibility normally only involves your employment status. Your IRA distributions should not impact your 401(k) eligibility. The $6,000 contribution limit for people over 50 applies to IRAs, not 401(k) plans. If you are still working, you cannot add to a Traditional IRA after reaching 70.5 years of age. This type of IRA forces you to annuitize and take out your IRA balance over the remainder of your life by way of the RMD. It is not "forever" like the Roth IRA.

Contributions cannot be made to your traditional IRA for the year in which you reach age 70 or for any later year.

401(k) annual contribution limit is around $22,500 for people over 50. A good place to put the RMD money? Not too many choices these days. Stock market not doing so well. Savings rates are in the basement. Bonds and commodities have done great the past decade. Since 2000, these two sectors have beaten the stock market and government securities sector. But they carry big risk. If interest rates rise sharply, they might take a big beating. I am not a financial advisor, but I would say to go with what you can tolerate in terms of the risk and reward profile of any investment. At your age, I hope that you have an adequate rainy day fund. If not, the RMD money should go there.

Nikko222 said:   raringvt said:   How long do you plan to continue working? If you are planning to retire next year and will have lower income it may make sense to delay your first RMD until next year so that you can take advantage of having lower income. If that's not the case, I would go ahead and take the RMD this year so that you don't create additional income next year.

As far as your 401(k), you do not need to begin taking distributions on that until you stop working (unless you are > 5% owner in the company sponsoring the plan). You may continue to contribute--the post above is correct, the max is $22,500--not $6k (that's an IRA).

What to do with the $? H&B! No, maybe you should skip the B at your age and just stick with H&V(iagra).


Nice suggestion about Viagra. Don't you need a prescription for that? Anyway, I'm planning to work for another 3 yrs before retirement. Frankly, I don't really have a lot of hobby so my job is one of the few hobby I have. I have a traditional IRA in one of the Vanguard Mutual Funds. Thank you.


Yes, you normally need a prescription for that. But, you can buy the cheap knockoffs from the email offers that fill up your spam mailbox without a prescription (probably made with suspect and possibly toxic materials). I have someone in my building who is in his mid-70s and still working. Over 50 years of employment. His wife died recently so he probably doesn't have a reason to retire. So his job is probably his hobby. Depending on which Vanguard Fund your IRA is in, you may want to shift some of the money to a more conservative fund if it is in a higher risk sector. If it is in the Money market fund earning nearly 0%, I would move it to something else (even a CD) to get you some interest. I would recommend the Wellesley Income Fund which combines stocks and bonds and which has had a decent five year average return relative to other funds in that company.

Not trying to steer business out of here, but they have an awesome crowd on the forums at Diehards.

fedguy said:   Nikko222 said:   raringvt said:   How long do you plan to continue working? If you are planning to retire next year and will have lower income it may make sense to delay your first RMD until next year so that you can take advantage of having lower income. If that's not the case, I would go ahead and take the RMD this year so that you don't create additional income next year.

As far as your 401(k), you do not need to begin taking distributions on that until you stop working (unless you are > 5% owner in the company sponsoring the plan). You may continue to contribute--the post above is correct, the max is $22,500--not $6k (that's an IRA).

What to do with the $? H&B! No, maybe you should skip the B at your age and just stick with H&V(iagra).


Nice suggestion about Viagra. Don't you need a prescription for that? Anyway, I'm planning to work for another 3 yrs before retirement. Frankly, I don't really have a lot of hobby so my job is one of the few hobby I have. I have a traditional IRA in one of the Vanguard Mutual Funds. Thank you.


Yes, you normally need a prescription for that. But, you can buy the cheap knockoffs from the email offers that fill up your spam mailbox without a prescription (probably made with suspect and possibly toxic materials). I have someone in my building who is in his mid-70s and still working. Over 50 years of employment. His wife died recently so he probably doesn't have a reason to retire. So his job is probably his hobby. Depending on which Vanguard Fund your IRA is in, you may want to shift some of the money to a more conservative fund if it is in a higher risk sector. If it is in the Money market fund earning nearly 0%, I would move it to something else (even a CD) to get you some interest. I would recommend the Wellesley Income Fund which combines stocks and bonds and which has had a decent five year average return relative to other funds in that company.


Thank you for the humor reply and the more specific answer that I was looking for. We have a regular account on wellesley already, it should be easier to rollover my traditional IRA there. Again, thank you.

NukeMedDude said:   Not trying to steer business out of here, but they have an awesome crowd on the forums at Diehards.

Good suggestion, i will check there too. Thank you.

You don't indicate what your income is, but if you're eligible to contribute to a Roth IRA that might be a good destination for your traditional IRA RMD. You can open a Roth IRA with any broker (Vanguard, Fidelity, etc.) and buy anything for it, and the money will grow tax-free. In the year you turn 70-1/2, you stop being able to contribute to a traditional IRA, but you can keep contributing to a Roth IRA as long as you have earned income.

ThePessimist said:   You don't indicate what your income is, but if you're eligible to contribute to a Roth IRA that might be a good destination for your traditional IRA RMD. You can open a Roth IRA with any broker (Vanguard, Fidelity, etc.) and buy anything for it, and the money will grow tax-free. In the year you turn 70-1/2, you stop being able to contribute to a traditional IRA, but you can keep contributing to a Roth IRA as long as you have earned income.

My income is around $70K/yr and my wife received around $20K in retirement benefits. Again, thank you for all the feedback I received.



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