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Ask the Expert: Which IRA beneficiary rules apply?

I'll be 64 this year. In 2019, I inherited a traditional IRA worth $61,700. I know that I have to start taking withdrawals by the end of this year, but since I'm still working I want to take out as little as possible. The person I inherited from was 66 years old. How do I decide how much to take out each year? I'm getting conflicting information.

There's a lot of confusion about this because a new law has changed the rules about how IRA beneficiaries must take withdrawals from inherited retirement accounts. But the old law still applies to people like you, who inherited an account from someone who died before 2020.

You must begin taking annual required minimum distributions (RMDs) from the account by Dec. 31 of the year after the original owner's death. Those RMDs are based on your life expectancy, as listed in the "Single Life Expectancy" table in Appendix C of IRS Publication 590.

A 64 year-old's listed life expectancy is 21.8 years. Your 2020 RMD is the Dec. 31, 2019, balance of the inherited IRA divided by 21.8. If that balance was $61,700, your 2020 RMD is $2,830.28. Your annual RMDs are taxable income; but the inherited IRA balance can keep growing untaxed.

The new law, which applies to beneficiaries who inherit accounts from people who die after 2019, eliminates annual RMDs. But it requires most beneficiaries to empty inherited IRAs by Dec. 31 of the 10th year after the year of the original owner's death.

"The only RMD is the entire balance of the account at the end of that 10th year after death," says Ed Slott, a Rockville Centre tax accountant.

The bottom line

The rules governing distributions from inherited retirement accounts depend partly on the deceased owner's date of death.

More information

nwsdy.li/IRSirabeneficiaryRMD

https://nwsdy.li/KitcesIRAbeneficiaryRMD

TO ASK THE EXPERT Send questions to Ask the Expert/Act 2, Newsday, 6 Corporate Center Dr., Melville, NY 11747, or email act2@newsday.com. Include your name, address and phone numbers. Questions can be answered only in this column. Advice is offered as general guidance. Check with your own consultants for your specific needs.

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