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re: Inherited IRA Question
Posted on 2/1/24 at 3:51 pm to HoustonChick86
Posted on 2/1/24 at 3:51 pm to HoustonChick86
You should consider consulting a CPA. Your missed RMDs are subject to up to 50% penalties for the years you didn’t take them.
Your mom passing in 2019 and your grandmother being 76 means you should have been taking RMDs every year since 2019. Addressing that should be your first priority.
Once that’s done, you should consider how much room you have in your tax bracket each year if you plan to spend it down quicker than the RMDs. Again, consult CPA. All at once is rarely a good idea, even with interest rates on debt.
Note: I’ve been an advisor for 15 years and I’ve never seen someone actually pay a penalty on missed RMDs, but they exist on paper nonetheless. Good luck.
Your mom passing in 2019 and your grandmother being 76 means you should have been taking RMDs every year since 2019. Addressing that should be your first priority.
Once that’s done, you should consider how much room you have in your tax bracket each year if you plan to spend it down quicker than the RMDs. Again, consult CPA. All at once is rarely a good idea, even with interest rates on debt.
Note: I’ve been an advisor for 15 years and I’ve never seen someone actually pay a penalty on missed RMDs, but they exist on paper nonetheless. Good luck.
2
Posted on 2/1/24 at 4:15 pm to slackster
quote:
Once that’s done, you should consider how much room you have in your tax bracket each year if you plan to spend it down quicker than the RMDs. Again, consult CPA. All at once is rarely a good idea, even with interest rates on debt.
I took that into consideration. I could take half and keep us in the same tax bracket and then take the other half another time or just disbursements from there on out.
The student loans are still $30k and I like the idea of debt free minus the house.
I guess I should find a CPA. Was hoping it was a simple answer.
Posted on 2/1/24 at 5:56 pm to slackster
quote:
Your mom passing in 2019 and your grandmother being 76 means you should have been taking RMDs every year since 2019.
While I'm not an expert, here is my understanding.
I agree the OP should owe penalty for grandma's IRA as RMDs should have started in 2017. Though I have read in other forums the IRS will work with you if you contact them about missed RMDs.
However, for the mother's IRA I think OP may be ok. Since mom passed away before 2020 and was only 59, the OP should qualify for the 5 year rule. Also year 2020 doesn't count toward the 5 year rule.
So I believe the OP has till end of 2025 to fully deplete the mother's IRA w/o penalty. OP can decide each year how much to take out as long as the account is empty before 2026.
If OP doesn't want to deplete by 2026, then take RMDs like grandmother's IRA but may owe penalty for missed years.
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary
Take a look at section 'Non-spouse beneficiary options' under 'Death of the account holder occurred before 2020'. Also look at the definition for the 5 year rule near the bottom.
This post was edited on 2/1/24 at 6:00 pm
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