RMD Withdrawals and the 10-Year Rule: Today’s Slott Report Mailbag

Thursday, April 28, 2022

By Andy Ives, CFP®, AIF®
IRA Analyst
Follow Us on Twitter: @theslottreport

Question:

I’m 68 years old. I would like to start IRA withdrawals. What are the rules for withdrawing before my RMDs are required at age 72?

Thanks,

Bob

Answer:

Bob,

There are no limitations to withdrawing your IRA before RMDs begin. As a 68-year-old, you have full access to your IRA whenever you want it, penalty free. Assuming all the dollars in your IRA are pre-tax (some people do have after-tax dollars in their IRAs), then any distribution will be taxable as ordinary income. This also assumes your IRA isn’t invested in something where liquidity might be an issue. As long as you are aware of the tax implications of an IRA withdrawal (and the possibility that the increased income could impact other items, like IRMAA surcharges in a couple of years), then your assets are available for you to use as you wish. However, before making any quick decisions, it might be a good idea to speak with a financial advisor.

Question:

Does the 10-year rule apply to an IRA with a charity as beneficiary?

Eddie

Answer:

Eddie,

Charities do not get the 10-year rule. As non-designated beneficiaries under the SECURE Act, they would instead (depending on the age of the IRA owner at death) need to be paid out over either the 5-year rule or the remaining life expectancy of the deceased IRA owner. However, if a charity is named as the beneficiary of an IRA, the most likely occurrence is that the charity will request a lump sum distribution as soon as possible. If there are co-beneficiaries named on the account, as long as the charity beneficiary is paid their portion of the IRA before September 30 of the year after the year of death, the 10-year rule would then apply to the remaining IRA beneficiaries, or possibly the stretch if they are eligible designated beneficiaries.

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