IRA owners and, in most cases, retirement plan participants must start taking annual required minimum distributions (RMDs) from their non-Roth accounts by April 1 following the year in which they reach RMD age (see table). This is known as their required beginning date (RBD).<\/p>\n
Likewise, beneficiaries must take RMDs from inherited accounts (including, in most cases, Roth accounts). The timing and amount of an individual beneficiary\u2019s RMDs depend on several factors, including the relationship of the beneficiary to the original account owner and whether the original owner had reached the RBD.<\/p>\n
Three key points apply to both owners and beneficiaries: (1) individuals must pay income taxes on the taxable portion of any distribution, (2) the larger the RMD, the higher the potential tax burden, and (3) failing to take the required amount generally results in an additional excise tax.1<\/sup><\/p>\n Spouses who are sole beneficiaries have the most options for managing inherited accounts. By default, a surviving spouse beneficiary is treated as what\u2019s known as an eligible designated beneficiary (EDB) with certain advantages (see next section, \u201cEDBs and DBs\u201d). And if the deceased spouse died before the RBD, a surviving spouse EDB who is the sole owner can wait until the year the deceased would have reached RMD age to begin distributions.<\/p>\n Alternatively, a surviving spouse who is the sole owner can generally roll over the inherited account to their own account or elect to be treated as the account owner (rather than as an EDB). In these cases, the rules for account owners would apply. However, there is a potential drawback to this move: if the surviving spouse is younger than 59\u00bd, a 10% early distribution penalty may apply to subsequent withdrawals unless an exception applies.<\/p>\n The SECURE Act separated other individual beneficiaries into two groups: EDBs and designated beneficiaries (DBs). EDBs are spouses and minor children of the deceased, those who are not more than 10 years younger than the deceased, and disabled and chronically ill individuals. DBs are essentially everyone else, including adult children and grandchildren.<\/p>\n EDBs have certain advantages over DBs. If the account owner dies before the RBD, an EDB is able to spread distributions over their own life expectancy. If the account owner dies on or after the RBD, an EDB may spread distributions over either their own life expectancy or that of the original account owner, whichever is more beneficial.2<\/sup><\/p>\n By contrast, DBs are required to liquidate inherited assets within 10 years, which could result in unanticipated and hefty tax bills. If the account owner dies before the RBD, the beneficiary can leave the account intact until year 10. If the owner dies on or after the RBD, a DB must generally take annual RMDs based on their own life expectancy in years one through nine, then liquidate the account in year 10.<\/p>\n The age that determines an account owner\u2019s RBD depends on the account owner\u2019s date of birth.<\/p>\n Work-sponsored retirement plans are not required to offer all distribution options; for example, an EDB may be required to follow the 10-year rule. However, both EDBs and DBs may roll eligible retirement plan assets into an inherited IRA, which may offer more options for managing RMDs.<\/p>\n This is just a broad overview of the complicated new rules as they apply to individual beneficiaries. If an account has multiple designated beneficiaries, or if a beneficiary is an entity such as a trust, charity, or estate, other rules apply. Beneficiaries should seek the assistance of an estate-planning attorney before making any decisions.<\/p>\n 1) The IRS has waived this tax as it applies to the DB 10-year rule through 2024. This information is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek guidance from an independent tax or legal professional. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. \u00a9 2024 Broadridge Financial Solutions, Inc.<\/p>\n","protected":false},"featured_media":1344,"template":"","meta":{"_acf_changed":false},"newsletter-category":[30],"class_list":["post-1343","newsletter","type-newsletter","status-publish","has-post-thumbnail","hentry","newsletter-category-september"],"acf":[],"yoast_head":"\nSpouse as sole beneficiary<\/h2>\n
EDBs and DBs<\/h2>\n
\n\n\n
\n Date of birth<\/u><\/strong><\/span><\/th>\n RMD age<\/u><\/strong><\/span><\/th>\n<\/tr>\n<\/thead>\n\n \n Before July 1, 1949<\/span><\/td>\n 70\u00bd<\/span><\/td>\n<\/tr>\n \n July 1, 1949, through 1950<\/span><\/td>\n 72<\/span><\/td>\n<\/tr>\n \n 1951 to 1959<\/span><\/td>\n 73<\/span><\/td>\n<\/tr>\n \n 1960 or later<\/span><\/td>\n 75<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
\nOther considerations<\/h2>\n
\n2) An inherited account must be liquidated 10 years after an EDB dies or a minor child EDB reaches age 21.<\/p>\n