New Feature! Inherited IRA
Have you inherited a retirement account? As you think about what to do with money inherited from an Individual Retirement Account (IRA), we’re here to help you understand your options and make a decision based on your financial situation. You have some big decisions to make about your inheritance. We can help you do it with confidence—and make things a little easier during an otherwise difficult time.
If you're a non spouse designated beneficiary of an IRA, you have the option to establish an inherited IRA to hold those funds. Inherited IRAs are like non-inherited IRAs in that they allow for tax-free growth of the assets within them, although inheritors cannot make new tax-deferred contributions to them. The rules, though, are complex. We’ve designed this new feature to help you understand and manage the impact of an Inherited IRA on your financial plan.
The Planner by default applies the IRS regulations below for Designated Beneficiaries as follows
When you add an Inherited IRA account the system will ask you for the original owner’s date of birth and date of death. From there it will apply the IRS regulations as follows:
Pre-tax Inherited IRAs
If you or your spouse inherited a non-spousal IRA and the original owner passed away prior to January 1, 2020 and prior to their beginning RMD age, by default the model will create annual RMD distributions based upon you/your spouse's life expectancy.
If you or your spouse inherited a non-spousal IRA and the original owner passed away prior to January 1, 2020 and after their beginning RMD age, by default the model will create annual RMD distributions based upon the longer of the your/ your spouse's or the original account owner’s life expectancy.
If you or your spouse inherited a non-spousal IRA and the original owner passed away on or after January 1, 2020 and prior to their beginning RMD age, by default the model will create a lump sum distribution and completely empty the account in the 10th year after the original account owner's death. For example, if the original owner died in 2024, the lump sum distribution will occur by 12/31/2034.
If you or your spouse inherited a non-spousal IRA and the original owner passed away on or after January 1, 2020 and after their beginning RMD age, by default the model will create annual RMD distributions based upon the longer of the your/your spouse's or the original account owner’s life expectancy. The model will also create a lump sum distribution and completely empty the account in the 10th year after the original account owner's death. For example, if the original owner died in 2024, the distribution will occur by 12/31/2034.
Roth Inherited IRAs
If you or your spouse inherited a non-spousal Roth IRA and the original owner passed away prior to January 1, 2020, by default the model will create annual RMD distributions based upon your or your spouse's life expectancy.
If you or your spouse inherited a non-spousal Roth IRA and the original owner passed away after January 1, 2020, by default the model will create a lump sum distribution and completely empty the account in the 10th year after the original account owner's death. For example, if the original owner died in 2024, the distribution will occur by 12/31/2034.
NOTES:
Inherited IRAs will be included in the default withdrawal strategies. Note: if you mark the account to be excluded from the withdrawal strategies, neither RMDs or 10-year rule distributions will be modeled.
Inherited IRA distributions resulting from either RMDs or the 10-Year Rule are deposited into the account selected for Excess Income.
If an inherited IRA account is marked as excluded from the withdrawal strategy, no 10 year rule distribution will be calculated or distributed from the account.
This feature does not smooth out Inherited IRA distributions, that enhancement is on the roadmap but not currently prioritized.
Inherited IRAs will not be considered when running the Roth Conversion Explorer.
This feature accounts for current Inherited IRAs. Future inherited IRAs are on the roadmap but not currently prioritized.
Want to Model Alternate Strategies in Boldin?
This feature does not smooth out Inherited IRA distributions, that enhancement is on the roadmap but not currently prioritized.
You do have the option to exclude the Inherited IRA from the withdrawal strategy and turn off the required distributions. And, you may do this in one scenario and not impact other scenarios.
You may manually smooth out Inherited IRA withdrawals using our Transfer feature. In order to distribute the Inherited IRA using an alternate strategy in Boldin, you may add transfers from your Inherited IRA to the account that’s prioritized in your withdrawal strategy to manage your cashflow, taxes, and more.
If you are a spouse who has inherited an IRA
The most common selection for an inherited spousal IRA is to transfer the assets into your own existing or new IRA. With this selection, the account will be subject to your own RMD requirement. In our model, you should account for this in the same manner as you would your own IRA.
The IRS also allows a spouse to keep the spousal IRA as an inherited IRA and take distributions based on their own life expectancy or delay beginning distributions until their spouse would have achieved their required beginning date for RMDs. If you inherited an IRA from a deceased spouse and kept it as an inherited account, you may add an Inherited IRA account and manipulate the dates to delay the RMD to the age you desire.
Future Inherited IRAs
Future Inherited IRAs are not accounted for at this time, aside from a spouse or partner in your plan. Upon the death of a spouse or partner the planner will assume the surviving spouse rolls over the assets into a new or existing IRA in their own name/their own IRA.