RMDs and Employer Plan Contributions: Today's Slott Report Mailbag
By Sarah Brenner, JD
Director of Retirement Education
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I am interested in your interpretation of the RMD (required minimum distribution) rules using the following facts:
- Original IRA owner’s DOB is 1/21/29
- Original IRA owner’s date of death is 12/29/21
- IRA’s nonspouse beneficiary’s DOB is 7/21/54
- No RMD was taken in 2022 by the non-spouse beneficiary
Does the beneficiary have both a 2022 and a 2023 RMD that can be taken in 2023?
The SECURE Act would apply to this inherited IRA. Under the SECURE Act, most nonspouse beneficiaries are subject to a 10-year payout rule. Additionally, the IRS proposed RMD regulations require RMDs to be paid during the 10-year period if the IRA owner died after his RMD required beginning date. That appears to be the situation here. However, the beneficiary would catch a break on the missed 2022 RMD because the IRS waived the penalty on these RMDs due to confusion over the new rules. That relief does not extend to 2023, so an RMD would need to be paid for this year.
My granddaughter (age 28) has a Roth IRA created from money earned from previous menial jobs. In 3 years she will complete her residency and as a radiologist, her earnings will be substantial and most likely she will not be eligible to contribute to a Roth IRA. Would her earnings also prevent her from continuing to contribute to a Roth 403(b) plan through her employer?
Good news for your granddaughter! While Roth IRAs are subject to income limits which prevent higher earners from contributing, Roth employer plans like a Roth 403(b) have no such limits. Her increased earnings will not preclude her from continuing to contribute to the Roth 403(b).
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