Have you inherited an IRA? Did the person die before January 1, 2020? If so, a new required minimum distribution table has been published, making the calculations much more complicated. To ensure the RMD for your inherited account(s), we recommend getting in touch with your financial professional, so you don’t get penalized! Want to set up a meeting with Richard or Angela to discuss your RDMs? Schedule a free consultation now! Getting started is easy. Visit our calendar and pick a day and time that works for you. That’s it!

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As we approach the year-end of 2022, it is important for those who have inherited an IRA to ensure they are calculating their required minimum distributions (RMDs) correctly. Failure to do so can result in a hefty penalty of 50% of the amount that should have been withdrawn, plus taxes.

Inheriting an IRA may seem like a significant windfall, but it also comes with certain responsibilities. One of these responsibilities is to calculate and withdraw the RMD each year, starting from the year after the account owner’s death. The RMD is based on the beneficiary’s life expectancy and the value of the account at the end of the previous year.

The penalty for not taking the RMD can be significant. For instance, if the RMD for a year is $10,000, the penalty for failing to withdraw the amount would be $5,000. This is in addition to the regular income tax that is due on the amount withdrawn.

To avoid the penalty, it is crucial that the beneficiary calculates their RMD correctly. This involves determining the appropriate life expectancy and using it to calculate the RMD amount. Additionally, the account balance at the end of the previous year must be used as the starting point for the calculation.

The good news is that there are resources available to help with these calculations. The IRS publishes a table that provides the life expectancy for different beneficiaries, and there are online calculators that can help with determining the RMD amount.

It is also important to note that beneficiaries have the option to withdraw more than the RMD amount. However, doing so does not reduce the RMD requirement for the following year.

There are some exceptions to the RMD requirement, such as when the beneficiary is the spouse of the account owner and chooses to treat the account as their own, or if the beneficiary is disabled or chronically ill. In these cases, the RMD requirement may be different or waived.

In conclusion, if you have inherited an IRA, it is important to ensure that you are correctly calculating your RMDs to avoid penalties and taxes. Take advantage of the resources available and consult with a financial advisor if needed to ensure compliance with the rules and regulations surrounding inherited IRAs.