Due to a number of increased requests regarding various types of retirement plans, I have created a three part Blog on “RETIREMENT ACCOUNTS MADE EASY!” This is Part Two of the series.
PART ONE covered traditional and Roth IRA’s. If you missed Part One you can resource it in a previous blog posted on August 18th, 2016.
I’ll conclude the series with Inherited IRA’s.
*** PART TWO ***
401(k)s and 403(b)s
Contributions: As long as you’re working, you can contribute to your employer’s plan, even if you’re over 70 1/2. If your employer offers a Roth option, you can contribute regardless of your income.
RMDs: Accounts with former employers are governed by most of the same RMD rules as traditional IRAs. This includes Roth 401(k)s and Roth 403(b)s, which are subject to RMDS — but you can get around them by rolling the money over to a Roth IRA. (Note: Rolling over accounts with former employers into IRAs has all kinds of other benefits, including potentially lower costs and more investment choices.)
However, there are no required distributions from your current employer’s plan if you’re still working — even if you’re older than 70 1/2 — as long as you don’t own 5% or more of the company. But once you do retire, if you’re 70 1/2 or older you should take your first RMD from that account by April 1 of the next year; you will then have to take another RMD by Dec. 31 of that year.
If you have multiple 401(k)s with former employers, each RMD must be taken from each individual account. The total value of RMDs from multiple 403(b)s, however, can be taken from just one account; also, money contributed to a 403(b) before 1987 doesn’t have to be distributed until age 75 if those amounts have been accounted for with separate records.
SEPs and SIMPLE IRAs
Contributions: Like other employer-sponsored accounts, you can make contributions as long as you’re working for the company that sponsors the plan, regardless of your age.
RMDs: Because SEPs and SIMPLEs are technically IRAs, they follow the IRA RMD rules. This means that the account holder must take RMDs at age 70 1/2, even if the person is still working for the company sponsoring the plan. This could result in a situation where a 70-something employee contributes to the plan while also having to take required distributions.
(Full credit to Robert Brokamp of The Motley Fool 8-1-16)
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