By Sarah Brenner, JD
Director of Retirement Education
I turn 72 this year.
I am getting notices from my many IRA custodians that they want a waiver on file if I am NOT using my account for the RMD (i.e., I am taking it somewhere else). They make it sound like if I do not contact them, that they will automatically cut me a check for the required RMD amount.
How can that be? Don’t custodians have to have permission or instructions to make such distributions?
You are correct in that it is possible to aggregate your RMDs from your many IRAs and take the total amount from one.
Many custodians will require you to sign a waiver to have on file if you do not want to take your RMD from the IRA at their institution. Without a such a waiver, they will automatically pay out the RMD. This is a common practice and is intended as a customer service to help ensure that RMDs are taken, even though ultimately the IRS views taking the RMD as the responsibility of the IRA owner.
I am trying to confirm that clients can do a Roth conversion before completing an RMD as long as we complete the full RMD later in the tax calendar year. The Slott website says that RMDs must be done first, but I have CPAs saying that’s not true as long as you meet the full RMD amount determined on the prior 12/31 valuation. Please help.
This is an area where we get a lot of questions, but the rules are very clear. RMDs can never be rolled over or converted. Further, the “first money out” rule says that the first funds distributed from an IRA in a calendar year when an RMD is due are considered the RMD. Because a conversion is a distribution and RMDs cannot be converted, the RMD must be taken prior to the conversion. It is not possible to convert an IRA and then take the RMD later.