What Is Required Minimum Distribution
A Required Minimum Distribution (RMD) is the amount the IRS requires you to withdraw annually from certain retirement accounts. For inherited IRAs, the rules changed dramatically under the SECURE Act (2019) and SECURE 2.0 (2022). If you've inherited a retirement account from a spouse, you now face much stricter withdrawal deadlines than previous generations did.
Why It Matters After Loss
Handling a deceased loved one's retirement accounts is one of many practical tasks that arrive during grief. Unlike decisions you can postpone, RMD deadlines are fixed by the IRS. Missing them triggers a 25% penalty on the amount you should have withdrawn (reduced to 10% if corrected within two years). For someone already overwhelmed by loss, this financial consequence can compound your stress at a vulnerable time.
The SECURE Act eliminated the "stretch IRA" strategy that let heirs extend withdrawals over their lifetime. Now most non-spouse beneficiaries must empty inherited IRAs within 10 years. Understanding these timelines helps you avoid costly mistakes while you're managing the practical side of the estate.
How RMD Works for Inherited Accounts
- Spouse beneficiaries: You can roll the inherited IRA into your own IRA and delay RMDs until you reach age 73 (as of 2023). This gives you the most flexibility.
- Non-spouse beneficiaries: You must withdraw the entire balance within 10 years of the account owner's death. Some accounts require annual distributions during those 10 years, depending on the beneficiary's age and when the original account holder died.
- Minor children: Special rules apply until they reach age of majority, then the 10-year deadline takes effect.
- Disabled or chronically ill beneficiaries: You may qualify for exemptions allowing distributions over your lifetime instead.
- Calculation: Your RMD equals the account balance on December 31 of the prior year divided by your life expectancy factor (found in IRS tables). If you inherit multiple IRAs, you can aggregate the RMD across accounts before withdrawing.
Practical Steps During Grief
These account tasks fit into your broader estate management responsibilities. First, locate all retirement account paperwork and identify whether you're the spouse or another beneficiary. Contact the financial institution holding the account to request a Beneficiary Designation Review and RMD calculation. Many firms provide worksheets showing exactly what you owe and when.
If you're struggling with the emotional weight of these decisions alongside grief, consider asking a trusted friend or family member to help organize the paperwork. Some people find that tackling these concrete, measurable tasks provides structure during the early shock of loss. Others find it overwhelming and prefer to delegate to an estate attorney or CPA. Both approaches are valid.
Common Questions
- What happens if I miss an RMD deadline? The IRS charges a 25% penalty on the shortfall amount (10% if corrected within two years). You can request a waiver if you can show reasonable cause, such as having lost track of accounts during bereavement or receiving poor guidance from a financial advisor.
- Can I take the money as a lump sum or must I spread withdrawals over time? Non-spouse beneficiaries must withdraw everything by year 10, but you choose the schedule. Some withdraw annually, others take it all at once. Tax implications differ, so discuss this with a tax professional based on your income and situation.
- Do I have to pay taxes on inherited IRA withdrawals? Yes. Withdrawals from a traditional IRA are taxable as ordinary income. Inherited Roth IRAs are generally tax-free. This can create a significant tax bill in the year you withdraw, so some people spread withdrawals across the 10-year window to manage their tax bracket.