Retirement Planning/RMD calculation


I'm 71 and recently retired. Earlier this year I made a direct rollover of my 401k (with pre-tax and after-tax contributions) to
a traditional IRA. Now my assets are commingled. What is the best way to calculate the taxable and non-taxable portion of my future RMDs.(I already received the RMD for 2012).
1. By filing form 8606 and calculate it every year. Or
2. Can I split my IRA account into two (without investing it in anything) before December 31, 2012 (for 2013 RMD):
one- non-deductible IRA with after-tax assets only,  the other-  a traditional IRA with the rest of the assets. Can this be done at the same financial institution or as a transfer to another one.

Hi Vera,

You can split your IRA into 2 different acconts either at the same institution or a new one, but you don't have to. If you have deductible and non deductible funds in the same IRA, your RMD would be calculated on the percentage. The deductible portion is fully taxable and the non deductible is only taxable on any investment gains realized. The amount you contributed was already taxed so you do not pay tax on that again. So let's say you have $100k total, $70k is in the deductible part and $30k is in the non deductible portion of which $10k is investment gain. Your RMD would be calculated for the amount of $90k.

So even if you split the account, you would still have to make 2 calculations for RMD's. There would be no tax benefit to doing such but it is not a bad idea if it helps you keep things straight in your mind and if you were able to move it without incurring any fees. Most annuities have no up front sales charge and will calculate the RMD's for you.

Here is a link to the IRS site which should answer any questions you have about RMD's. I hope this helps Vera, best of luck!


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David M Iannopollo


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