Inherited IRA
Greetings all.
I inherited an IRA from a nonspouse who was not taking RMD (she was 64). She passed in December 2019. I elected to take the withdrawal based on the five year rule. Rather than divide the total by five and take 1/5 each year, I decided to take the full amount (approximately 20K) in the year 2024. I understand that the account would have to be emptied by December 31, 2024. My question is about the impact of the CARES act on the five year rule. I believe that even though I am not taking RMDs annually, the fact that 2020 RMDs were eliminated essentially extending my five years to six years. Thus, the new date for emptying the account is now December 31, 2025. I just want to make certain that I am correct in my assumption. Thank you for taking the time to read and reply. My best wishes to all. David
Permalink Submitted by Alan - IRA critic on Wed, 2021-02-24 03:49
You are correct. When RMDs were suspended for 2020, that year did not count in the 5 year rule period, so your inherited IRA must be drained by 12/31/2025. If for some reason you wanted to switch over to life expectancy RMDs you could by taking a Table I life expectancy RMD by 12/31/2021, but you probably have a reason for choosing the 5 year rule when very few do.
Permalink Submitted by David Hermon on Thu, 2021-02-25 16:07
Thank you for your reply! While I do have a reason for choosing the 5 year rule, your reply nudged me to contact Vanguard and change to the stretch IRA. Even if I do choose to empty the account in 5 years I can do so; however, your suggestion to stretch the iRA just gives me more options in case anything changes in the next few years. Vanguard informed me that the RMD for this year based on the life expectancy will be less than $1,000. So thank you for your reply and nudge to give myself more flexibility going forward! Best wishes to you and yours.