Spousal Inherited IRA
Hi:
Inherited 401k plan for a spousal bene who is the same age as spouse who passed, 47. Is the main difference between rolling it to Trad IRA or Inherited IRA, the table used to calculate the RMDs once the account holder turns 70 1/2 and not having to pay an early 10% early penalty if a distribution is needed before that age from the Inherited IRA? If Uniforms is used for Trad IRA and Single for Inherited IRA will the RMD amount be a big difference?
Thanks.
Permalink Submitted by Alan - IRA critic on Fri, 2014-09-12 20:30
If the surviving spouse is the sole designated beneficiary, no RMDs are required until the deceased spouse would have reached 70.5. Since they were the same age, RMDs as owner would begin in the same year either way. Until then, retaining the plan or inherited IRA in beneficiary form will allow for any distributions needed to be taken penalty free. Surviving spouse should therefore wait until they reach 59.5 before rolling the funds over to their own IRA account. That way, when survivor reaches 70.5, RMDs will be lower because the Uniform Table will apply. In addition, the beneficiary named by the surviving spouse will be able to use their own life expectancy for RMDs after the surviving spouse passes rather than having to continue to use the single life table divisors the surviving spouse used.
Permalink Submitted by CHARLIE STAMOS on Tue, 2014-09-16 13:16
THANKS!