11 Feb Can my RMD go back into an IRA?
Q. My wife’s father passed away almost two years ago. Because he was 72, my wife, and her brothers and sister, have to take an RMD every year from his IRA, which is taxable income for us. She has the federal and state taxes withheld, and she receives about $1,300 per year after taxes. Is it allowable to not have taxes withheld from the RMD, and roll all of the money directly into an IRA?
A. It’s a great idea to want to set money aside in a retirement account if you don’t need it, but it’s not that easy.
Required Minimum Distributions, whether from your own IRA or from an inherited IRA, are not eligible to be rolled over into another tax-deferred account, such as an IRA, said Amanda Lott, a certified financial planner with RegentAtlantic Capital in Morristown.
“Any amounts that are rolled over will be first treated as a distribution from the inherited IRA — i.e. taxable to you — and then, treated as an IRA contribution, which is subject to annual limits based on earnings levels.” Lott said. “If the amount deemed contributed to the IRA is more than the annual limit, a percent tax on any excess contributions will be applied.”
Learn more about retirement plan limits at the IRS web site.
As always, check with your tax advisor who knows your personal situation before you make any decisions.
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This story was first posted in February 2015.NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.