ROTH IRA RMDs for Beneficiary

[Randall]

I'm a little confused on these rules.  As I understand it, RMDs for Roths are required for a non-spouse beneficiary.  Beneficiaries are excepted from the five year rule.  But the ten year rule?   Does the beneficiary have to to begin taking the distributions over the ten years or can the beneficiary wait and take the entire amount during the 10th year?

[Lion EA]

I just got out of an NAEA Update webinar with A.J. Reynolds where he touched on RMD for IRA Beneficiaries. Long answer is...

https://www.irs.gov/retirement-plans/required-minimum-distributions-for-ira-beneficiaries

Notice 2024-35 extends the temporary relief from RMDs for certain inherited account holders.

Short answer:

ROTH owners always deemed to die before the RBD, so no RMDs required in year 1-9 for beneficiary; drain account by end of year 10 (planning might suggest a lump sum is not the most tax advantaged way to distribute). Responsibility of beneficiary to take year of death RMD if not yet taken by decedent. [Note: this paragraph based upon beneficiary being a non-spouse person, and not an estate.]

[BrewOne]

A.J. is great, always enjoy his presentations.

IRA's are anything but simple--unfortunately unless the custodian is looking out for the client, the account holder can really screw up.

[mcbreck]

The custodian is only there to make sure you don't take action which is restricted by IRS rules. They aren't there to aid the investor.

 

I'm pretty sure the IRS ruled you don't HAVE to take an amount every year of the 10 year period on traditional or Roth IRAs. It's just usually a good idea on Traditional IRAs.

 

[BulldogTom]

59 minutes ago, mcbreck said:

I'm pretty sure the IRS ruled you don't HAVE to take an amount every year of the 10 year period on traditional or Roth IRAs. It's just usually a good idea on Traditional IRAs.

 

That is incorrect.   Exactly the opposite.   I don't have the sites right now, but you must take RMDs for an inherited IRA unless you are a spouse or a special exception.

Tom
Longview, TX

 

[BrewOne]

Publication 590-B does not articulate the RMD rules for a Roth; sends you back to Chapter 1 (Traditional IRA) to determine RMD for a beneficiary Roth. 

[Lee B]

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary

Tom is correct , the RMD rules for non spousal beneficiaries depend on whether they are an "eligible designated beneficiary or not.

[mcbreck]

I was wrong. I've been having clients take them but our investment firm doesn't provide a hard RMD on inherited IRAs subject to the Secure2.0 act. It has a "suggested" RMD. I usually distribute a little extra since they've gained about 30% easily the last two years in account value.

[Randall]

20 hours ago, BrewOne said:

Publication 590-B does not articulate the RMD rules for a Roth; sends you back to Chapter 1 (Traditional IRA) to determine RMD for a beneficiary Roth. 

This is what I've found too.  When it comes to RMDs or inherited accounts, it seems they run Roth with the traditional IRAs.  And it's sometimes confusing to distinguish if what they're saying is the same for both or different for each type of account.