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FIRST-YEAR RMDS AND IRA SURVIVING SPOUSE OPTIONS – TODAY’S SLOTT REPORT MAILBAG

By Ian Berger, JD
IRA Analyst

Question:

I am retired and turned 72 in September, 2021, so I must begin required beginning distributions (RMDs) by April, 2022. I have traditional and Roth IRAs as well as a defined contribution plan with a former employer. I understand I must withdraw my RMD before withdrawing an amount for anything else (e.g., Roth conversion) from both my traditional IRA and my defined contribution plan. But is that requirement limited to withdrawals within each type of plan (IRA and defined contribution)?  In other words, am I allowed to take my RMD from my IRA and then do a Roth conversion from that IRA this year, while delaying my 2021 RMD from my defined contribution plan until April 2022?

Thanks in advance for answering.

Tom

Answer:

Hi Tom,

Yes, you can take your 2021 RMD from your traditional IRA this year while delaying your 2021 defined contribution (DC) plan RMD until next April 1. They are separate entities that require separate decisions.  Keep in mind that delaying your first DC plan RMD means you will have two plan RMDs in 2022 – one for 2021 (due by 4/1/22) and one for 2022 (due by 12/31/22).

Question:

The account owner, age 65, dies in 2021 and is survived by a 35 year-old spouse (30 years his junior – sole beneficiary of a traditional IRA). What are the rules (options) for the surviving spouse?

Many thanks!

John

Answer:

Hi John,

The surviving spouse has two options. She can remain a beneficiary of her deceased husband’s IRA, or she can move the IRA funds to her own IRA (a “spousal rollover”).

Remaining a beneficiary makes sense if the surviving spouse needs to tap into the inherited IRA funds before age 59 1/2, because any withdrawals would be exempt from the 10% early distribution penalty. But even if she doesn’t need the funds from the inherited IRA, she would be forced to start taking annual RMDs in seven years – when her deceased husband would have turned age 72. At age 59 ½, she could then do a spousal rollover with the inherited IRA. (A spousal rollover can be done at any time, but doing it before age 59 ½ would expose her to the 10% penalty on any pre-59 ½ distributions if no other exception applied.)  However, after the spousal rollover, RMDs wouldn’t be required until she turns age 72 – a long way off.

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