Q. Which table do I use to calculate my Solo 401k Plan RMD?
A: For lifetime distributions to Solo 401k Plan participant, you have two tables to choose from:
Uniform Lifetime Table–this table is usually used if the Solo 401k participant is not married; or
IRS Joint Life Tables–used if the Solo 401k participant’s spouse is more than ten (10) years younger than him or her and is the sole beneficiary the entire year.
Q: I don’t have enough liquid cash in my Solo 401k | Self-Directed 401k to take my RMD because all of my Solo 401k funds are invested in real estate. What should I do?
A: The IRS still requires that you take you RMD. Therefore, you will need to re-register part of the real estate by deeding it to your personal name to satisfy RMD, and report it on form 1099-R. Alternatively, you have option to sell part of the real estate and then distribute the proceeds to satisfy the RMD.
Q: I’m over 70 1/2 years old but still self-employed. Do I still have to take required minimum distribution RMD from my Solo 401k | Self-Directed 401k?
A: Yes. The IRS requires the self-employed who have a Solo 401k to take RMDs. Confusion exists with respect to those who own less than 5% of the company not having to begin making distributions until April 1st following the year you retire, but, again, this exception does not apply to the self-employed because you typically own more than 5% of the company.
More RMD Information
The required minimum distribution (RMD) regulations require a Solo 401k participant to begin distribution no later than his required beginning date (RBD) and to continue such distributions over a period not extending beyond the life expectancy of the participant and a designated beneficiary.
The RBD for a Solo 401k participant is April 1 of the calendar year following the later of the calendar year in which the participant attains age 70 1/2. If she fails to take the RMD, she would be subject to an excess accumulation penalty equivalent to 50 percent of the amount that should have been distributed but was not.
The RMD is typically calculated by dividing the account balance by the applicable distribution period. The account balance is generally the balance as of the last valuation date in the calendar year immediately preceding a year for which an RMD is due.
Calculating my Solo 401k RMD
For existing and prospective clients, we will calculate your RMD and prepare form 1099-R, the form used for reporting distributions including RMDs from Solo 401ks at no extra cost. Please e-mail us at email@example.com if you would like us to calculate your RMD.
Contribute to Solo 401k While Taking RMDs QUESTION:
Good question, and yes you can still contribute to the solo 401k plan and the contributions would be tax-deductible if made to the pretax solo 401k account. In other words, you can still make solo 401k contributions based on your net self-employment income even though you are also required to take RMDs. This contribution exception is not afforded to IRAs once you are required to take RMDs.
Lastly, visit our following blogs for more information on RMDs, and Form 1099-R reporting.