RMDs

Submitted by Anthony Zalesky on Mon, 2019-08-26 15:34

If someone is an IRA beneficiary, non-spouse, using the Single Life Table and for example the life expectancy is 10.8. Assuming they reduce this divisor by one each year, ultimately the life expectancy after 10 years will be .8. In that .8 year, must the total account be depleted, such as $100K IRA account value on 12/31 of the preceding year, divided by .8 is $125K, which is higher than the account itself. What happens if the actual value on the day of withdrawal is below the $100K value? Is there a penalty for not taking the RMD?



Submitted by Alan - IRA critic on Mon, 2019-08-26 17:31

  • There is never a penalty if the full IRA balance is distributed even though less than the RMD. The balance at the time of the distribution depends on gain or loss after 12/31 of the prior year, therefore if there was a large enough gain, the IRA may not be depleted even though the divisor is under 1.0. 
  • If a beneficiary has more than one IRA account inherited from the same decedent, since the RMD aggregation rules also apply to these inherited IRAs, if one of them is depleted the shortfall should be taken from the other IRA in addition to the RMD for that inherited IRA until both are depleted.  There is no “on point” IRS Reg on this, but the aggregation rules certainly point to this conclusion. 

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