Spouse Inherited Roth IRA
Hello,
If a spouse rolled over an inherited Roth 401k to an inherited Roth ira, does the 5 year aging clock continue to accrue while funds are in the inherited Roth IRA account to avoid taxation on earnings? I’ve seen articles claiming that the 5 year aging clock stops at death of the original account holder and earnings are always taxable if the rule has not been met prior to passing away.
Permalink Submitted by Alan - IRA critic on Fri, 2024-08-30 17:07
The inherited Roth IRA will have a new 5 year clock before any gains generated in the inherited Roth IRA will be tax free. However, a surviving spouse should rarely maintain an inherited Roth IRA. Instead they should elect to assume ownership of it, which will eliminate any beneficiary RMDs. Their own Roth still needs to meet the 5 year holding requirement and age 59.5 to become qualified, but if the spouse already has their own Roth, the 5 year clock would have started with the first Roth contribution to the existing Roth.