IRA Spouse beneficiary withdrawal rules different when 10+ year age difference
Hello.
I have seen a table from the IRS detailing the unique precise differences in withdrawal rates after a much younger spouse inherits an IRA from an older spouse. I have seen confusing, ridiculous explanations about the options for that surviving spouse, too.
SOMEONE here must know about this. There are 19 years in age between my wife and myself. I am the elder. Can you point me to that particular lovely IRS Table to be followed in such a case? Thanks in advance.
Permalink Submitted by Alan - IRA critic on Wed, 2024-02-21 02:58
If your spouse is the sole beneficiary of your IRA, your spouse should maintain beneficiary status until reaching age 59.5, since she will be able to take distributions from the inherited IRA without penalty. And if you pass prior your required beginning date, you wife will have no beneficiary RMDs until the year you would have reached your first RMD year. When beneficiary RMDs are required or your wife reaches 59.5, whichever comes later, she should elect to assume ownership of the IRA, after which she can use the Uniform Table for her RMDs. However, prior to 59.5 if she is required to take beneficiary RMDs, she must use the SIngle Life table each year (no 1.0 divisor reductions) to calculate her beneficiary RMDs. The single life table as a beneficiary will result in a much higher RMD than the Uniform Table, although based on her age her RMDs as the owner would not start until she is 73 if born from 1951 to 1959, or 75 if born after 1959.
For example, if you passed at 82 and she is 63, she should simply elect to assume ownership right away since she would be over 59.5. She would have no RMDs until her RMD at least 10 years later, but could take distributions without penalty if needed.
Another example, if you were 76 and she was 57, she should wait until 59.5 before assuming ownership, even though she would have to take beneficiary RMDs using the single life table for a couple years. She could also roll over to her own IRA the amount she would never needs until 59.5 and take beneficiary RMDs from the partial balance not rolled over.
Permalink Submitted by Crash Davis on Wed, 2024-02-21 07:51
Alan, I am much obliged. That explanation makes things at least a bit clearer. Maybe my Schwab guy can address our PARTICULAR situation. I enjoy learning about this stuff, but I’d need your words right in front of me to make sense of this crazy-quilt of bull-hockey nonsense. As for wifey? “In one ear and out the other. …So, she can choose to remain a “beneficiary” OR (when advantageous) choose to claim and own the inherited IRA. At such a much younger age, her RMDs are stretched out for many years further than would be the case otherwise. Or is my tax guy the one to ask?
Permalink Submitted by Alan - IRA critic on Wed, 2024-02-21 14:26
Her best options mostly depend on her age when she inherits your IRA. If under 59.5, she should keep the IRA titled as inherited and then elect to assume ownership at 59.5. If she inherits after 59.5, she should elect to assume ownership right away. With either the Schwab rep or your tax preparer, it depends on who they are at the time and whether they are personally well versed on the spousal options. For decades now, the largest error a surviving spouse can make is assuming ownership prior to 59.5, then needing distributions which will be subject to the 10% penalty.