Non-Spouse Inherited IRA RMD Rules 2018?
I just had a call with a very large pension company rep. He mentioned that someone that inherits an IRA and is a non-spouse that chooses to take RMD’s must exhaust the IRA by his mid to late 80’s. I am TOTALLY confused. I thought that such a person must take the RMD’s out using a table that goes to about 110 years old. This is a “Stretch IRA”.
The rep came up an example for such a person at age 67 using a table that forced RMD’s that exhausted the IRA by the time the person was 86! I have NO idea where this table comes from.
I assumed that the following Single Life Expectancy table would apply:
https://www.irs.gov/publications/p590b#en_US_2018_publink1000231236
Right? Wrong? Can somebody point me to the exact detailed IRS statement for this situation AND the EXACT life expectancy table one must use?
Thank you.
Permalink Submitted by David Mertz on Sat, 2019-03-16 00:00
A non-spouse beneficiary must use the Single Life Expectancy table and the reduce-by-1 method of calculating RMDs. A non-spouse beneficiary who is age 67 in the year of the IRA owner’s death has a life expectancy of 18.6 the following year (based on age 68), the first year that beneficiary RMDs are required. Because the 18.6 must be reduced by 1 each subsequent year, the divisor for the year that the beneficiary reaches age 86 will be 0.6, meaning that any remaining balance will be distributed that year.
Permalink Submitted by Gerald D on Sat, 2019-03-16 00:50
Permalink, thank you very much for your quick and concise answer.OUCH!!!! Not what I thought. Since we have a number of non-spouse beneficiaries over a fair age range, is it possible to point me to the precise IRS documentation and table for this rule?Maybe I should be looking at doing larger Roth conversions in order to “stretch”further at no taxes. Any oppinion?
Permalink Submitted by Alan - IRA critic on Sat, 2019-03-16 01:03
The general rule is on p 9 of Pub 590 B. But also see p 12 regarding multiple individual beneficiaries. With multiple individual beneficiaries, separate inherited IRAs must be created by 12/31 of the year following the owner’s death in order for each beneficiary to use their own single life expectancy from RMD Table I. You were originally referring to the Uniform Table, but that only applies to owners, not to beneficiaries. The owner can use the long stretch of the Uniform Table by simply living longer, and the beneficiaries will then inherit a larger IRA. I would not convert at a tax rate higher than your expected marginal rate in retirement.
Permalink Submitted by Gerald D on Sat, 2019-03-16 02:34
Thank you!!!!