Minimum Required Distributions from IRA

[curiousgeorge]

Turned 70 1/2 Dec 20. Had a job Jan to Sept 2012. Rolled over 401K to existing IRA; company deducted MRD before rolling over. Also took MRD from the 2011 balance of the IRA (prior to the 401k rollover); this MRD is separate from the amount distributed from the 401K.

New job since Dec 10. Is IRA MRD still required? Can IRA contributions be made because person is still working?

Thank you for your kind assistance.

[mwcpa]

Traditional IRAs (including rollover) require an MRD once you turn 70 1/2 and for every year thereafter.
www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics---Required-Minimum-Distributions-(RMDs)

You may fund a Roth IRA (provided you otherwise qualify) as long as you have "earned" income. You cannot fund a deductible IRA.
www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-IRA-Contribution-Limits

[curiousgeorge]

Thank you very much mwcpa.

What is the maximum income a single person can have in order to open a Roth IRA for 2012? 2013? How long do Roth IRA contributions must be in the account before tax-free distributions can be made? If Roth IRA account owner dies, what taxes apply to distributions taken by non-spouse beneficiary?

Thanks again and best wishes for a happy, healthy new year.

[mwcpa]

"What is the maximum income a single person can have in order to open a Roth IRA for 2012? 2013?"
2012.... www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Amount-of-Roth-IRA-Contributions-That-You-Can-Make-for-2012
2013.... www.irs.gov/Retirement-Plans/Amount-of-Roth-IRA-Contributions-That-You-Can-Make-For-2013
As the contribution to a Roth is contingent upon filing status and Modified Adjusted Gross Income the charts in the links are helpful.... IRS publication 590 is helpful.... www.irs.gov/publications/p590/ch02.html

"How long do Roth IRA contributions must be in the account before tax-free distributions can be made?"
Generally, 5 years. But, only the "appreciation" in the account is subject to tax, ones contribution (basis) in the account is not. Example, I put 5,000 in a Roth designated IRA; in 2 years I need to withdraw some money and I take 1,000 when the account is worth 6,000. None of the 1,000 is taxable as the ordering rules related to distributions are first assigned to my contributions to the account. the link I gave to publication 590 is helpful here.

"If Roth IRA account owner dies, what taxes apply to distributions taken by non-spouse beneficiary?"
None if the account deposits are 5 years or older, but if not, here is an example from the IRS publication 590

"When Ms. Hibbard died in 2011, her Roth IRA contained regular contributions of $4,000, a conversion contribution of $10,000 that was made in 2007, and earnings of $2,000. No distributions had been made from her IRA. She had no basis in the conversion contribution in 2007.

When she established this Roth IRA (her first) in 2007, she named each of her four children as equal beneficiaries. Each child will receive one-fourth of each type of contribution and one-fourth of the earnings. An immediate distribution of $4,000 to each child will be treated as $1,000 from regular contributions, $2,500 from conversion contributions, and $500 from earnings.

In this case, because the distributions are made before the end of the applicable 5-year period for a qualified distribution, each beneficiary includes $500 in income for 2011. The 10% additional tax on early distributions does not apply because the distribution was made to the beneficiaries as a result of the death of the IRA owner."

[curiousgeorge]

mwcpa - Thank you very much for your comprehensive response.

[mwcpa]

happy to help give you some direction here.....