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Email Guidance – Transferring IRAs After 70½

Posted by James M. Carlson
Mar 06 2019

Q-1 Could she transfer her IRA from another institution into this one here or not, since she is over 70½. She is trying to consolidate.

A-1 A person who is subject to the RMD rules may consolidate a number of IRAs at one bank.

A person can transfer an IRA subject to an RMD at Bank #1 to Bank #2. The 2019 RMD then must be taken from Bank #2 by 12/31/2019.

Transferring an RMD is permissible whereas taking a distribution and rolling it over is not allowed.

The law has been designed so that there is a time a traditional IRA will cease to exist so that the tax benefits end.

The law requires a person age 70½ or older to take a RMD each year.

It appears your customer wants to get around the RMD rule.

In general, once an RMD is withdrawn it cannot be re-contributed as an annual contribution or as a rollover contribution.

The only exception I'm aware of is - if a person has both a traditional IRA and a SEP-IRA or SIMPLE IRA, the person must take an RMD from each such IRA each year. However if the person is self-employed and is still eligible for a SEP IRA contribution or a SIMPLE IRA contribution, then the person can us the RMD amounts as the source of cash to make their the SEP-IRA or SIMPLE IRA contribution.

Categories: Email Guidance