401(k) beneficiary Roth IRA conversion

Submitted by Sten Lindquist on Wed, 2023-12-13 14:56

Non spouse beneficiary has a 401(k) they inherited post RBD in 2023. They have taken the RMD for 2023 and are converting to an inherited Roth IRA. Will the rule on the inherited Roth be 10 years with no annual RMD or will they need to take an annual distribution because it was in a pre tax 401(k) at death?



Submitted by Alan - IRA critic on Wed, 2023-12-13 15:39

  • I doubt that the IRS has or will issue a specific Reg to address this scenario (or strategy), but since the 401k account was inherited post RBD, the annual RMDs should continue to apply to the created inherited Roth IRA in years 1-9 of the 10 year rule. The 2024 RMD will probably be waived if the IRS again cannot finalize the Secure Regs by fall, 2024. 
  • Since the inherited Roth IRA will not be qualified for 5 more years, the RMDs or other distributions in the first 5 years will have to be reported on Form 8606, even though they will be non taxable and not subject to penalty.

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