Required minimum distributions: Frequently asked questions

What is a required minimum distribution (RMD)?

The RMD is exactly as it sounds. For traditional Individual Retirement Accounts (IRAs), owners have the responsibility to make annual distributions from their retirement account, beginning at a certain age.

When do I take my RMD?

As of Jan. 1, 2023, your RMD age is dependent upon the year in which you were born. If you reached age 72 on or before Dec. 31, 2022, you were supposed to have been taking distributions and should begin taking them if not. If you were not age 72 by Dec. 31, 2022, you must take your first distribution by April 15 of the year following attainment of age 73.

In addition to the RMD age, distributions were also updated with the establishment of the ten-year rule. If a beneficiary is subject to the ten-year rule, they must empty the account by the tenth year following the year of the original owner’s (or eligible beneficiary’s) death. This rule initially caused confusion and required the IRS to issue Notice 2022-53, stating that the beneficiary of an IRA, who was subject to the ten-year rule but did not take an RMD in 2021 or 2022, will not be penalized. RMDs were waived in 2020 due to COVID-19. For those applicable individuals, RMDs must be taken in 2023.

What happens at death?

When the owner of an IRA passes away, there is typically a beneficiary assigned to the account, to whom the account now belongs to. Unless you are the spouse of the deceased, in which case you can rollover your spouse’s IRA into your own, the beneficiary will have an inherited IRA established in their name, e.g., John Smith inherited IRA beneficiary of Mary Smith.

The nature of your relationship with the deceased matters in terms of your distribution options and breaks down into two categories:

1. Eligible designated beneficiary

• Spouse
• Minor child of deceased
• Disabled or chronically ill individual
• Individual who is not more than ten years younger than the original IRA owner

2. Designated beneficiary

• Everyone else

Distribution options

There are three distribution options:

1. Eligible designated beneficiary (spousal only) rules

• If the original owner died prior to the required beginning date (when RMDs should have begun for decedent), the spousal beneficiary can keep the RMD as an inherited IRA. If keeping as an inherited IRA, they can delay beginning distributions until the original owner would have reached RMD age or take distributions based on their own life expectancy. The spousal beneficiary can also decide to rollover into their own IRA and take distributions based on their own life expectancy.
• If the original owner died after the required beginning date, the spousal beneficiary can keep as an inherited IRA and take distributions based on their own life expectancy or rollover into their own IRA. They must take distributions based on their own life expectancy if they rollover.

2. Eligible designated beneficiary (nonspouse) rules

• The eligible designated beneficiary (nonspouse) can take distributions over the longer of their own life expectancy or the original owner’s life expectancy or follow the ten-year rule

3. Designated beneficiary should follow the ten-year rule

Changes from the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019

We have covered the rules for current inherited IRA procedures, but the SECURE Act of 2019 changed the rules for beneficiaries if the death of the original owner occurred after 2019 Dec. 31, 2019). So, for deaths pre-2020, there are different rules to follow. The manner of beneficiary status and their respective distribution options are broken down below.

Pre-2020 death of original owner

1. Spouse beneficiary

• If the original owner died prior to the required beginning date (when RMDs should have begun for decedent), the beneficiary can rollover into their own IRA (use their own life expectancy for distributions). Or, they can keep as an inherited IRA and take distributions based on their own life expectancy
• If the original owner died after the required beginning date, the beneficiary can take distributions over their own life expectancy or the account owner’s remaining life expectancy

2. Nonspouse beneficiary

• If the original owner died prior to the required beginning date (when RMDs should have begun for the decedent), the beneficiary can take distributions beginning on their own life expectancy, beginning the end of the year following the year of death
• If the original owner died after the required beginning date, the beneficiary can take distributions based on longer of their own life expectancy or the original owner’s life expectancy

Citations:

Retirement Topics – Beneficiary, IRS, Aug. 2023

RMD Rules for Inherited IRAs, Vanguard

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