RMDS
I am beneficiary of my late wife’s TDA in her 403B held by Teachers Retirement System of New York. She was a 79 year old retired NY school teacher and had been taking her RMDS for a number of years. She died Nov. 15, 2020. I am 88 years old. If I leave funds at TRS can I receive RMDS based on my wife’s age rather than my age.They would be smaller amounts which I prefer.
Permalink Submitted by Alan - IRA critic on Tue, 2021-04-27 18:00
If you keep the account in beneficiary form, you can calculate beneficiary RMDs using the age she would have attained each year. If at the end of 2020 she would still have been 79, your RMD divisor for 2021 will be 9.8 using the Single LIfe Table I. However, if you rolled the inherited 403b account to your own IRA by the end of 2021, your future RMDs will be much lower because as the IRA owner you can use the Uniform Table. Even though you are 9 years older, your IRA RMD starting in 2022 will be much lower than if you continue with the inherited 403b, even using her younger age, because the 403b must use the Single Life table. Your RMDs would drop by roughly 23% starting in 2022. If you do the direct rollover to your own IRA, the 403b will distribute your 2021 beneficiary RMD before rolling over the remainder.
The above addresses the amount of your RMDs, not NYS taxation. DIstributions from TRS are tax free for NYS taxes as I understand it including beneficiaries. But if you roll the distribution over to an IRA, your NYS income subtraction is likely reduced to 20,000, instead of 100%. Therefore, the NYS tax break as long as you live in NYS may offset the increased federal taxes on a larger RMD. You might want to check into this further with respect to the NYS pension exclusion – Pub 36.