Confusion continues over the new rules for inheriting IRAs. Here is what you need to know as of April 2024.
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Mike Bernard, CFP® offers advisory services through KFG Wealth Management, LLC dba Korhorn Financial Group. This information is for general financial education and is not intended to provide specific investment advice or recommendations. All investing and investment strategies involve risk, including the potential loss of principal. Asset allocation & diversification do not ensure a profit or prevent a loss in a declining market. Past performance is not a guarantee of future results.
Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks….(read more)
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I was the beneficiary when my 49 year old step-son passed in 07-2020. I began taking distributions for tax year 2020. I wanted to evenly spread it over the 10 years. I was 70 then and have been retired since 54. I have a defined benefit pension that essentially eliminates all the "later when you earn less" schemes. I know, an eloquent problem to have. Since I ran into RMDs for my own IRA. Something I didn't learn immediately was that RMDs can be combined, in my case, I could take enough from the inherited IRA to satisfy my own IRA. There is no need to take from both. A point you might want to emphasize in your videos. It has been my understanding that anyone who would inherit my inherited IRA would be bound by the original 10 year period as it goes back to the original owner. In my example it would still have to be withdrawn by 2029. It makes me think I should choose a child as the beneficiary as they would have no income and could withdraw it tax free. Currently I have all accounts designated as POD or TOD to my spouse. Without me, our joint income would drop a lot where the tax issues of RMDs wouldn't be much of an issue. With my step-son's probate, it took 3 months to have the court rule on his will as being valid and my appointment as executor. I have structured all of my assets to bypass probate with TODs and PODs. The courts can decide who gets my used underwear.
My husbands father passed away on Sept 2023. My husband and his sister inherited an IRA. His sister cashed hers in and paid the tax.My husband chose to take his over the 10 year time period. He was told by the bank that he would have to take out the RMD because his father died before he got around to taking it out. So we removed the required amt.
He tried to get it out before the end of the year because he was told if we did not he would be penalized and thought he did only to find out that it was never really taken out until Jan 2 of 2024. He was never penalized i am guessing because his father passed away.
But according to what you are saying if the RMD was waived for 2023 the bank was wrong in telling us my husband had to take the RMD.
Would the old rules apply if you inherited from a parent? Or is that in the 10 year allowance?
Good grief!
We chose to take ten draw downs regardless of the two previous year's wavier. Each year we use that net of tax to bridge our early retirement along with our monthly brokerage withdrawal until we get to SS. We still haven't addressed our own IRAs which we would potentially like to convert to roth. The issue for us is we get really significant subsidies for Healthcare right now. The income from the inherited IRA and our interest and dividends if we convert or take higher amount from the inherited IRA kills the subsidies.
So in you example say that lady died 3/2022 is it withdrawal 3/3032 or December 3032?
Does this 10 year rules applies to 401k/457 account too ?