By Ian Berger, JD
Has the IRS clarified the 10-year rule on inherited IRAs? Do you have to take RMDs each year or can you wait until the 10th year? Also, does this rule apply to inherited Roth IRAs?
Yes, the IRS has clarified that annual RMDs from an inherited IRA are not required under the 10-year payout rule. The 10-year rule only requires that the entire account be distributed by December 31 of the year of the 10-year anniversary of the original IRA owner’s death. The rule does also apply to Roth IRAs.
My wife inherited an IRA from her mother. I understood she had to take out yearly distributions. We have calculated these distributions by taking the Single Life Expectancy Table for her age when her mother died in 2015. My wife was 73 then, so the divisor was 14.8. We have been subtracting one from that number each year since then — last year was 8.8 and this year 7.8. Do I understand that now she may use the new for 2022 life expectancy tables for her distribution from this inherited account? She’ll be 80 this year, and the divisor for age 80 is 20.2.
It appears that your wife started taking RMDs from the inherited IRA in 2015 at age 73. However, her first RMD wasn’t required until 2016 – the year after her mother died. The 2016 RMD should have been based on a 14.1 life expectancy factor (the factor under the old Single Life Expectancy Table for a 74 year-old). Subtracting one from 14.1 each year after 2016 would mean that the 2021 factor was actually 9.1.
It’s not a problem if prior distributions were higher than the RMD. Based on your math, it appears your wife may have taken a little more annually than she needed to.
Starting in 2022, the new IRS life expectancy tables must be used. To calculate your wife’s 2022 RMD, we determine what the factor would have been for 2016 (her first RMD year) under the new Single Life Expectancy Table. That factor for a 74-year-old is 15.6. Then we subtract one for each succeeding year to arrive at a 9.6 factor for 2022. (Note that the 20.2 factor you mentioned is from the Uniform Lifetime Table, which is the incorrect table in your situation.)