Which Method of Withdrawal to Use
We have a client (turns 43 in 2025) who inherited an IRA from her spouse. Her spouse passed away in October 2020 after turning 36 years old. She has not taken the spouse’s IRA and rolled it into her own at this point.
- What formula would we use to calculate her 2025 RMD (we believe there isn’t an RMD for her, but thought I’d ask)?
- What rules do we follow for her RMD (Stretch IRA, 10 Year Rule, 10 Year Rule with RMDs in Years 1-9, something else) now and going forward?
- What would happen in Year 10 if we left it as a Bene IRA (instead of rolling it into her own IRA)?
- Do the answers to Questions 1, 2, & 3 change if the inherited account was a Roth IRA?
Thanks
Permalink Submitted by Alan - IRA critic on Mon, 2025-02-10 15:09
As long as she is the sole beneficiary, beneficiary RMDs do not begin until the year deceased spouse would have reached 75, so almost 3.5 decades from now.
She is an EDB, so the 10 year rule does not apply. Nothing happens relative to RMDs until the year deceased spouse would have reached 75.
Same rules if this had been a Roth IRA.
She can take distributions as needed without penalty. After 59.5 she could elect to assume ownership of the inherited IRA and could then take distributions without penalty. But as the owner her RMDs would start at 75, two years sooner than if the IRA remained in inherited status because she was 2 years older than spouse. If that last two years without RMDs is important she could wait until the year those beneficiary RMDs are required, assume ownership then, and would be treated as the owner for that entire year, resulting in a lower RMD from the Uniform Table.
The worst error would be to assume ownership or roll it over to her own IRA prior to 59.5