Inherited IRA and the 10 year rule
Under the SECURE act an inherited IRA needs to be withdrawn in most cases within 10 years of the IRA owners death but what are the rules during the 10 years for the beneficiary? Do they have to take RMD’s for years 1-9 and then withdraw the remainder in year 10 or can they let it sit until year 10 and then withdraw it all at once? I haven’t heard anything about the distribution guidelines except to say that it must be withdrawn completely in 10 years.
Permalink Submitted by Alan - IRA critic on Tue, 2020-01-07 18:01
There are no annual RMDs under the 10 year rule. The balance can sit there until the end of the 10 year period, however that would result in a large tax bill in the last year unless the inherited IRA is very small. Therefore, owners of inherited TIRAs would normally withdraw the balance over the 10 years in amounts that reflect their tax situation each year. But they are not required to. For an inherited Roth IRA, the distributions would be non taxable, so for inherited Roths it is better to wait until the end of the period to take distributions.