403(b) RMD for Beneficial Spouse who is older

Submitted by Katherine Buccieri on Wed, 2017-10-18 13:38

My client inherited her husband’s 403(b) this year. Her husband died at the age of 55, prior to his RBD.

Wife is age 58. As the beneficial owner, is her required beginning date the year that he would have turned 70 1/2, even though she will turn 70 1/2 three years before than that?

Would the best option for her be to maintain the 403(b) as the beneficial owner, until her husband would have turned 70 1/2, then convert it to an IRA, and take RMDs based on her age and the uniform table?



Submitted by Alan - IRA critic on Wed, 2017-10-18 19:02

  • Yes, if she does not need the money and wishes to defer RMDs as long as possible, she should not take any distributions from the plan (or from an inherited IRA due to a direct rollover from the plan). In the year prior to the year husband would have reached 70.5, she should roll the balance into her own IRA. The following year (she will be 73 or 74) she will take IRA RMDs using the Uniform Table. If she waited until the actual year he would have reached 70.5 to do the rollover, the plan would be required to distribute a beneficiary RMD using Table I for that year and her RMD for that year would be considerably higher than from an RMD from her own IRA.
  • Note that if she passes before rolling to her own IRA and prior to the end of the year her husband would have reached 70.5, her own beneficiaries are protected and still treated as designated beneficiaries that can use their own life expectancy for their beneficiary RMDs. But if she forgets to do the IRA rollover by the end of that year and then passes, her own beneficiaries will be treated as successor beneficiaries and will have to continue her RMD schedule instead of getting their own stretch. All this means that if she wants to wait and defer RMDs as long as possible, she cannot lose track of the last year to do the IRA rollover without consequence.

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