By Ian Berger, JD
IRA Analyst

Question:

Hello Ed,

I have been a fan of yours for a long time (and the owner of a copy of The Retirement Savings Time Bomb) and have always appreciated your insights.

We have a client who is age 58 years and is the sole beneficiary of a traditional IRA of a non-spouse relative (sister) who died at age 51 in 2022. The client is therefore an eligible designated beneficiary (EDB) because she is not more than 10 years younger than the deceased, So, she can choose to stretch required minimum distributions (RMDs) over her lifetime based on the Single Life Table.

My assumption is that our client must begin taking RMDs in the year following the year of death (and not wait until she attains age 73), but I am unable to confirm this. Also, due to the fact that the IRS waived RMDs for IRAs inherited between 2020 and 2023, can she begin taking stretch RMDs in 2025 using the factor for her age in 2023 (minus 2.0)?

I appreciate your help.

Michael

Answer:

Hi Michael,

Thank you for the kind words! Your assumption that your client should have started taking annual RMDs in 2023 is correct. Only spouse beneficiaries who roll over an inherited IRA to their own IRA can delay RMDs until age 73. Further, the IRS waiver you mentioned only covers non-spouse beneficiaries subject to the 10-year payment rule who are required to take annual RMDs. It does not cover EDBs subject to the stretch like your client. So, your client has missed RMDs for 2023 and 2024 and should request a penalty waiver using IRS Form 5329.  Alternatively, your client could choose to be governed by the 10-year rule. In that case, there would be no annual RMDs, but the entire inherited IRA would need to be emptied by 12/31/32.

Question:

I have a significant amount of money in an IRA. My son keeps bugging me to roll over some each year to a Roth IRA. Can I do this if I am retired and have no job and no earned income.

Thanks,

Ray

Answer:

Hi Ray,

Yes. You can do a Roth conversion in any year regardless of what your compensation is and even if you have no compensation. The rule is different for traditional IRA or Roth IRA contributions, where you need compensation up to the amount of your contribution.

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https://irahelp.com/stretch-rmds-and-roth-conversions-todays-slott-report-mailbag/