Any calculators to estimate benef IRA growth over time incl. RMDs ?
Trying to do some planning for a client.
Deceased left small IRA account to several non-spouse beneficiaries, all under age 21 and no income yet. Each one will receive less than $8k. I am trying to compare scenarios of taking lump sum, paying the 10% tax, and growing that money over time in a taxable account versus leaving it in an inherited IRA and letting it grow tax deferred while taking the single life RMD’s out each year. Was hoping there was some sort of calculator out there I could use to show hypothetical growth in the inherited IRA while taking into account the annual RMD requirement over say 30 or 40 years.
Thanks for any pointers.
edit:
I should point out I saw this one (below), but it appears to use the deceased’s RMD factor when showing withdrawals over time, and not the lower single-life stretch factors for the beneficiary. Not ideal.
Permalink Submitted by Alan - IRA critic on Fri, 2015-09-04 17:55
There would be no 10% penalty on distributions because these are death benefits (1099R coded 4). Instead to taking annual RMDs that would be less than $150 to start, you might consider distributing the entire balance over 2 or 3 years and saving the money to fund Roth IRA contributions once they start to have earned income. Best to have future growth in a Roth that will never have RMDs than a TIRA which will be taxable and subject to decades of RMDs. Of course, the Roth IRA could also be used as an emergency fund if they can be trusted not to touch it unless there was a true emergency.
Permalink Submitted by Robert Bracey on Fri, 2015-09-04 22:49
Thank you Alan. You make a good point. Also, the 10% I referred to was if they were to take a lump sum now and remove all the money from the IRA, rather than stretching it as a ben. IRA. Appreciate the quick reply. Still open to links to ben IRA calculators if anyone has some good ones.
Permalink Submitted by Alan - IRA critic on Fri, 2015-09-04 23:53
With respect to the ordinary income tax due on distributions, the kiddie tax could come into play because the distributions are treated as investment income of the child.