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Required Distributions of Inherited Roth IRA

What are the rules for RMD's on inherited Roth IRA's, spouse vs. non-spouse? Does a spouse inheriting a Roth IRA have to take RMD's during their lifetime? What about a non-spouse beneficiary - does the non-spouse beneficiary have to take RMD's? If so, how are they calculated?
Thank you for your questions. The rules for Roth IRAs that are inherited are, in fact, different depending on the relationship to the deceased original owner.

If you were the spouse of that original owner, you are not required to take minimum required distributions (MRDs or RMDs) if you take the Roth IRA as your own.

If you are a non-spouse beneficiary of the original owner, you do have to begin taking MRDs from that Inherited Roth IRA by December 31st of the year after the year of death. The MRDs are calculated based on a few factors. Assuming you separated the assets into your own Inherited Roth IRA in a timely fashion, you base the MRDs on your age, and use the Single Life Expectancy Table from the IRS. You would calculate an MRD for the account in the year after the year of death and derive the life expectancy factor for that year based on your age in that year. You can find the Single Life Expectancy Table on our website here: http://personal.fidelity.com/produc.... As you can see in the table, if you are 40 years old in the year after the year of death, then you would be using a Life Expectancy factor of 43.6 for your MRD. Then each year after that year, you would subtract one from that Life Expectancy factor and use that to calculate your MRD.

An easy solution for you would be to sign up for automatic withdrawals for inherited accounts on Fidelity.com/autowithd where your MRD will be calculated for you each year, and then distributed based on the schedule you choose.

If you have an Inherited Roth IRA with Fidelity, you will have access to our Retirement Distribution Center (RDC) where we estimate your MRD each year. Learn about the RDC here: https://www.fidelity.com/retirement...

We also have two Fidelity Viewpoints® articles that have helpful information about inherited accounts for spouse inheritors (https://www.fidelity.com/viewpoints...) and non-spouse inheritors (https://www.fidelity.com/viewpoints...).

This page on our website offers an overview of MRD rules for inherited accounts: https://www.fidelity.com/retirement...

You can always talk to a Fidelity retirement representative about the MRD for your account if needed.

Ken
1 week ago
by
AskKen
 

can i combine my rmd from a 401k and non-roth ira or do i need to withdraw from each separately?

Thank you for your question on minimum required distributions (MRDs or RMDs) from your retirement accounts.

The MRD from a 401(k) must be calculated separately from your IRAs. In fact, if you have more than one 401(k), you will need to take an MRD from each account separately.

For your non-Roth IRAs you can calculate the MRD for each account, and then distribute the total withdrawal amount across any or all of your IRAs as you wish.

If you have any additional questions about MRDs we have a page of MRD frequently asked questions on Fidelity.com that you might find helpful: https://www.fidelity.com/retirement...

Ken
1 week ago
by
AskKen
 

I turn 59 1/2 on Janurary 28th I would like to start taking some money out of my rollover 401k I have with Fidelity What do I have to do.

I want to be able to take small withdrawls as needed not a monthly withdrawl. ie to pay off a short term debt.
After you turn 59½, you have the option of rolling your 401(k) into an IRA. You are then able to take withdrawals from your Rollover IRA and other IRAs without the 10% early withdrawal penalty.

You can take those withdrawals online at Fidelity.com by choosing the Accounts & Trade tab at the top of the page. From there, you can select Transfer Money/Shares. You will need to log in to your account and then, depending on where you want to send the money, choose one of the different options.

If you prefer, you can use a form available at Fidelity.com called Withdrawals – IRA One-Time, which can be found here: https://www.fidelity.com/bin-public...

Thanks for your question.

Ken
1 week ago
by
AskKen
 

Inherited IRA withdrawl age

At what age my (younger) wife can receive penalty free withdrawls from my IRA, assuming that she inherits it and my withdrawls were underway penalty free (passed my age of 59 1/2)? Does the same rule apply to my children?
Thank you for your question about Inherited IRA withdrawals.

There is no 10% early withdrawal penalty for Inherited IRAs, so your wife would be able to make withdrawals prior to reaching age 59½. The distributions are coded as “death distributions,” one of the exceptions to the 10% early withdrawal penalty. If your wife would be inheriting a Roth IRA, be aware of the 5-year rule for Roth IRA distributions. If the account has been open for less than 5 years, the 5-year rule penalty may apply to distributions of earnings from that account. So if your spouse is younger than age 59½, she would want to keep the assets in an Inherited IRA until the 5-year holding period is over, or until she is older than 59½. At that time, it might be beneficial for her to put the assets into her own IRA and then not have to take minimum required distributions (MRDs) until she reaches age 70½.

You may want to read our Fidelity Viewpoints® article on inherited assets: https://www.fidelity.com/viewpoints...

If your children are the beneficiaries of your IRA, note that they would need to take MRDs beginning in the year after the year of death. Those distributions would also not be subject to an early withdrawal penalty since they are considered death distributions. Your children cannot put the assets into their own IRA; this is only an option for a spouse.

Here is another Viewpoints article on inheriting as a non-spouse that you might find helpful: https://www.fidelity.com/viewpoints...

I hope this helps.

Sincerely,

Ken
1 week, 6 days ago
by
AskKen
 

I am over age 62. What are the restrictions and consequences on withdrawing money from an IRA and from an Roth IRA.

Thank you for your question about taking withdrawals from your Traditional IRA compared to your Roth IRA.

For your Traditional IRA:
• You are no longer subject to early withdrawal penalties since you are over age 59½.
• You will need to start taking minimum required distributions (MRDs) once you turn age 70½.
• Traditional IRA withdrawals are included in your taxable income in the calendar year in which you take the IRA distribution. As you file your income tax for the year, there is a line where you indicate whether or not your IRA was funded with pre-tax contributions, which is the case with most Traditional IRAs.

For your Roth IRA:
• You are not subject to any income tax on your distributions since you made contributions with post-tax money.
• You may be subject to early withdrawal penalties on earnings if your account does not pass the 5-year aging rule, meaning that you must wait 5 years after your initial contribution to the Roth before taking withdrawals.
• Roth IRAs do not require MRDs during the lifetime of the original owner, so you will not be required to take distributions when you turn 70½ years old.

I hope this comparison is helpful.

Ken

Important Additional Information:
A distribution from a Roth IRA is tax free and penalty free, provided the five-year aging requirement has been satisfied and one of the following conditions is met: age 59½, disability, qualified first-time home purchase, or death.
1 week, 6 days ago
by
AskKen
 

what percenter do i take out at 70 1/2

i have money in other
Thank you for your question about taking minimum required distributions (MRDs) from your IRAs at age 70½.

Each year, as you get older, there is a new life expectancy factor that is used to determine how much you need to withdraw. If you visit the Retirement Distribution Center at www.Fidelity.com/RDC you will see an estimate of your MRDs for each year once you turn age 70½.

You can also read this article on MRDs to get an overview of the process: https://www.fidelity.com/retirement...

I hope this helps.

Sincerely,

Ken
1 week, 6 days ago
by
AskKen
 

My understanding is that I can take money out of my IRA and put it back within 60 days and will not be taxed or penalized on the withdrawal...correct?

Hi Kevan,

Yes, this is technically correct. The IRS allows for what they call 60-day rollover which gives you the option of taking a distribution and replacing it within 60 days without penalty. You should note that you are responsible for replacing the entire original distributed amount within 60 days, and the consequences for not doing so can be significant. Any amount not replaced is considered a taxable distribution in the year it is received and is also subject to a 10% penalty if you are under age 59½.

So while it is possible to take money out of your IRA and replace it, there are a number of potential pitfalls to doing so. Because of this, you should consult with your tax advisor before moving forward with any plan to remove assets from your IRA.

Ken
1 month ago
by
AskKen
 

Can I use funds from my rollover IRA to increase my traditional IRA account balance?

I have $1500 in a traditional IRA and would like to increase the amount so I can invest money into a Fidelity mutual fund. Mutual funds usually have a minimum higher than $1500. I will also continue to invest in the traditional IRA in the future.
Thanks for your question. There are a couple of ways you could approach this that will help you achieve your goal. If you haven’t already done a rollover, you can roll old workplace plans, such as 401(k)s, into an existing IRA to help increase the existing account’s balance.

If you already have a rollover account, then you can also move money from the Rollover IRA to your Traditional IRA without any tax implications. To learn more about how to do this from an outside account or between your Fidelity accounts, visit this page: https://www.fidelity.com/customer-s...

Ken
1 month ago
by
AskKen
 

Can a retired person with a working spouse contribute to a spousal IRA?

Hi David,

Yes, as long as the retired or non-working spouse is under age 70½ (for a Traditional IRA; there are no age limits on Roth IRAs) then an employed spouse can contribute to a Spousal IRA but must have the income to support those contributions. The employed spouse’s earned income must be at least as much as the contribution to all IRAs that you both have. To be eligible, you must also file a joint tax return.

The type of IRA and how much you can contribute depend on the working spouse’s income and the non-working spouse’s age. To learn more, visit our IRA Center at https://www.fidelity.com/retirement... and select the account type you are interested in for details.

Thanks.

Ken
1 month ago
by
AskKen
 

I have already named beneficiaries for my Fidelity IRAs. When I die, how do they contact Fidelity -- phone number? email? snailmail address? -- to

Thank you for your question, Dianne. It’s good that you have named beneficiaries for your IRAs, and hopefully you have done this for all your accounts that allow naming of beneficiaries. Many people don’t realize that certain assets, such as retirement accounts, life insurance policies, and annuities, pass to the beneficiaries named on those assets, and not according to the provisions of their will or trust. This means that the beneficiary designations on those accounts will overrule whatever is stated in your will or trust.

That’s why it’s crucial to keep your beneficiary designations up to date as the circumstances in your life change. This is something that should probably be revisited once a year, or with each major life change, such as a marriage, divorce, birth of a child, or death of a spouse.

To answer your specific question, in the event of your passing, your beneficiaries can call Fidelity’s Inheritor Services group at 800-544-0003. We will be happy to help them with the inheritance process.

Ken
1 month, 1 week ago
by
AskKen