Another Inherited IRA question

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Topic Author
mxs
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Another Inherited IRA question

Post by mxs » Sun May 19, 2019 10:43 am

I am the beneficiary of a TIRA of about 25k. I would like to keep it as an inherited IRA. I am confused about the RMD's. The owner was my brother who was 47, born in December. I am 35, my birthday is in August. I don't know if any of that matters, that is where I am confused. When would RMD'S start and what are they based on?

Silk McCue
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Re: Another Inherited IRA question

Post by Silk McCue » Sun May 19, 2019 11:21 am

Sorry for your loss. You must keep it as an inherited IRA as you are a non-spouse and must take RMDs using the Single Life Table (unless you choose to draw down more than those required amounts up to the entire balance today).

Take a look at this Wiki:

Scroll down to “IRA inherited from someone other than your spouse” and use the IRA Distributions to look at the Single Life Table

https://www.bogleheads.org/wiki/Inheriting_an_IRA

Cheers

btenny
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Re: Another Inherited IRA question

Post by btenny » Sun May 19, 2019 11:26 am

Go read government publication 590 on IRA. I think you need to start ira rmds this year and use Table 1 for your age. So I think you need to take a rmd of 1/48.5 or slightly more than 2%. Read carefully. Pay attention to see when first year rmd is required vs date of death.

Sorry for your loss.

sport
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Re: Another Inherited IRA question

Post by sport » Sun May 19, 2019 11:32 am

btenny wrote:
Sun May 19, 2019 11:26 am
Go read government publication 590 on IRA. I think you need to start ira rmds this year and use Table 1 for your age. So I think you need to take a rmd of 1/48.5 or slightly more than 2%. Read carefully. Pay attention to see when first year rmd is required vs date of death.
Some years ago, Pub 590 was split into two parts. 590-A covers contributions, 590-B covers withdrawals. The information on RMDs for inherited IRAs begins on page 8 of Pub 590-B https://www.irs.gov/pub/irs-pdf/p590b.pdf

Topic Author
mxs
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Re: Another Inherited IRA question

Post by mxs » Sun May 19, 2019 11:44 am

Thank you for the info!

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Reb Tevye
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Re: Another Inherited IRA question

Post by Reb Tevye » Sun May 19, 2019 11:46 am

And note that for each subsequent year you do NOT go back the table and look up a new divisor. If your first year RMD divisor is n, then your second year divisor is n-1, then n-2...
RMD calculators which ask for the decedent’s year of death and your date of birth should all do this correctly, but it’s easy to make a mistake by just going back to the table and looking up a divisor for your then current age.
"So, what would have been so terrible if I had a small fortune?"

scrabbler1
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Re: Another Inherited IRA question

Post by scrabbler1 » Sun May 19, 2019 12:00 pm

My friend inherited an IRA back in 2012 following the death of his remaining parent. As Reb Teyve pointed out, once you have the correct divisor for the first year, all you do is step it down by one every year while using the year's beginning balance in the numerator. With my friend, who was 49 when he inherited the IRA, I have him withdraw the RMD taken up to the next $50 increment to make it easy to keep track of it for tax purposes.

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mxs
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Re: Another Inherited IRA question

Post by mxs » Sun May 19, 2019 12:42 pm

From page 11 of 590b "After the first distribu-
tion year, reduce your life expectancy by one for each
subsequent year." Is that your check the table the first year then subtract by one, then two, etc the following years? If my brother passed in 2019, it sounds like I don't have to take an RMD until 2020, and I will base it upon my age in 2020 after August of 37. Does that sound right?

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Reb Tevye
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Re: Another Inherited IRA question

Post by Reb Tevye » Sun May 19, 2019 5:05 pm

mxs wrote:
Sun May 19, 2019 12:42 pm
From page 11 of 590b "After the first distribu-
tion year, reduce your life expectancy by one for each
subsequent year." Is that your check the table the first year then subtract by one, then two, etc the following years?
Yes.
mxs wrote:
Sun May 19, 2019 12:42 pm
If my brother passed in 2019, it sounds like I don't have to take an RMD until 2020, and I will base it upon my age in 2020 after August of 37. Does that sound right?
I believe the answer is yes.
Since your brother was not already taking RMDs, none are due in 2019. For an older decedent already taking RMDs, one would need to ensure a 2019 RMD was taken by the beneficiary or the decedent.
You will use your your age (since you are younger than your brother) as of the end of 2020 to take your RMD in 2020 based on your Inh IRA value on Dec 31 2019.

Make sure you set up and fund your Inh IRA this year, a direct transfer of assets should be easy.
"So, what would have been so terrible if I had a small fortune?"

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Watty
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Re: Another Inherited IRA question

Post by Watty » Sun May 19, 2019 6:39 pm

Your IRA custodian may be able to calculate and automatically do the RMD but you should be sure to check to make sure that it gets done since glitches can happen.

If you have a retirement account that you would not otherwise be maxing out then you may be able to make additional withdrawals from the inherited IRA and also increase your retirement account contributions.

For example if you were not maxing it out you could increase your 401k payroll deductions by $1,000 a month and also withdraw $1,000 a month from the inherited IRA. When you do your taxes these will normally cancel each other out so you would not need to pay taxes on the inherited IRA withdrawal until possibly decades from now when you withdraw the move from the 401k when you are retired.

This would also reduce the next years RMD.

If you did not want to be that agressive you could just put the money from the RMD into a deductible retirement account like an IRA if you are eligible to do that.

Topic Author
mxs
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Re: Another Inherited IRA question

Post by mxs » Sun May 19, 2019 6:55 pm

Thank you all again. I plan on moving it to Vanguard for simplicity sake. I don't know what I will do with the RMD'S but you have provided some good options and I have plenty of time. I really didn't think this would happen to me and initially I thought there was no designated beneficiary but here I am trying to make the best of this sad situation.

TN_INVEST
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Re: Another Inherited IRA question

Post by TN_INVEST » Mon May 20, 2019 2:32 pm

btenny wrote:
Sun May 19, 2019 11:26 am
Go read government publication 590 on IRA. I think you need to start ira rmds this year and use Table 1 for your age. So I think you need to take a rmd of 1/48.5 or slightly more than 2%. Read carefully. Pay attention to see when first year rmd is required vs date of death.

Sorry for your loss.
This.

You'll need to take just over 2% for your first RMD (you can take more)

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