Inherited 401k to IRA Spouse rmd required

Submitted by Janie Williams on Fri, 2023-08-25 21:43

TP died 2023, 63 years old. 401(k) Spouse beneficiary 10 years younger. If spouse transfers funds to bene IRA and elects not to take RMDs until TP’s RBD, what happens if spouse needs to take out of Inh-IRA within the 10 years before TP w/be 73? Will spouse still be able to delay other distributions and begin taking RMDs in year TP would be 73, or will the required distributions revert to the 10-year rule? In other words, does taking the earlier distribution negate the option to wait until TP w/be 73? Would it be best to elect option 3 and take distributions based on own life expectancy in case spouse needs more money before the year TP w/be 73?



Submitted by Alan - IRA critic on Fri, 2023-08-25 22:15

  • Based on year of TP birth being 1960, TPs RMDs would begin at age 75. Surviving spouse (if sole beneficiary) is an EDB not subject to the 10 year rule and can take penalty free distributions as needed before then with no negative consequences. But once the surviving spouse reaches 59.5 they should elect to assume ownership of the inherited IRA and it will be many years later before the spouse (age 75) must take Uniform Table RMDs.
  • The only way the 10 year rule would apply is if the surviving spouse specificially opts out of EDB treatment and in almost all situations that would be a mistake. Such opt out deadline would be the end of 2024.
  • Note that per Sec 327 of Secure  2.0, these same rules will apply to the 401k effective in 2024. Therefore, if the spouse lives in a state that has weak creditor protection, they will be able to use these rules and retain the balance in the 401k with ERISA creditor protection. The only potential pitfall is that the 401k might not offer flexible distribution options. 

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