Save time with our cheat sheets, fact sheets, checklists & books!

March 6, 2009

I think found a way to avoid taking RMDs. Can you tell me if it could work?

Share on print
Share on facebook
Share on twitter
Share on pinterest
Share on linkedin

I think found a way to avoid taking RMDs. Can you tell me if it could work?

QuestionLet’s say I take a distributionin December, and leave only $10 in my traditional IRA. This means that when my custodian calculates my RMD amount, it will be $0.00 (rounding to the nearest dollar) since my December 31 fair market value (FMV) will be $10. Given that I have 60-days to rollover the amount, I can rollover the amount in January, bringing my balance back to what it was before I took the distribution. I think I can do this every year and always avoid the RMD. Do you agree? And if not, why not?


No. That will not allow you to avoid taking your RMD.
Under the RMD regulations, the December 31 fair market value (FMV) used to calculate your RMD must be calculated as follows:

December 31 FMV + outstanding rollover contributions + outstanding transfers + outstanding recharacterizations of IRA or Roth contributions

• Outstanding rollovers are rollover contributions of distributions taken from a traditional IRA, SEP IRA or SIMPLE IRA that are timely rolled over to another traditional, SEP or SIMPLE IRA after December 31
• Outstanding transfers are transfers initiated before the end of the year and left the delivering traditional, SEP or SIMPLE IRA before December 31, but did not get credited to the receiving traditional, SEP or SIMPLE IRA until after December 31
• Outstanding recharacterizations are IRA or Roth contributions that are timely recharacterized after December 31

Therefore, in the example you gave, you are required to add (back) the amount that you rollover within 60-days to your December 31 FMV, in order to determine your correct RMD amount.

In short; you cannot avoid taking your RMD by completing a distribution before year-end, only to rollover the amount (within 60-days) after the end of the year.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

Share on facebook
Share on twitter
Share on pinterest
Share on linkedin
Share on print

Keep Learning


Definition The definition of custodian depends on the responsibility of the financial institution.   To make the necessary distinction between the different roles they play for

403(b) Final Regulations Issued

The Treasury Department and the IRS released final regulations related Section 403(b) Plans These regulations are the first comprehensive section 403(b) regulations since 1964, and

Be among the first to know when

IRA Rules