A Safer Retirement and Environment – What We’re Implementing to Help Keep You Safe: READ MORE

Here at Chadmere Capital Inurance and Financial Services, we are adhering to state and local guidelines in order to protect both the health and safety of clients and staff. Keeping our clients and staff safe is our highest priority and we’re taking all appropriate measures to ensure a safe environment. Should you prefer to not meet face-to-face, we are continuing to serve our clients through virtual settings such as Zoom or phone calls.

We look forward to continuing to help individuals and families achieve their ideal retirements.

Chademere Capital Insurance and Financial Services
(803) 285-0060

CLOSE

INHERITED IRAS AND RMDS: TODAY’S SLOTT REPORT MAILBAG

By Sarah Brenner, JD
IRA Analyst

Question:

I have read your updates and shared information regarding the SECURE bill that is in the Senate currently.  The information discusses the non-spouse beneficiaries of IRAs will need to take distributions over 10 years as a lifetime stretch will not be an option anymore.

Do you have any information on existing Inherited IRAs that are already in the stretch phase?  My wife inherited an IRA in 2007 and we are stretching it over her lifetime.  Does the bill grandfather existing and focus on future inherited IRAs?  I realize we will not know the final answer until the bill is passed by both chambers and signed by the President, but wondered if you had any preliminary information.

Thank you,

Brad

Answer:

Hi Brad,

Good news for current holders of inherited IRAs! The version of the SECURE Act, which recently passed the House but stalled in the Senate, would grandfather those accounts. The stretch could continue for them. The new rules would only be effective for deaths after December 31, 2019. Stay tuned to the Slott Report as we follow all developments with this proposed legislation.

Question:

Hello and good morning from Pennsylvania.  I admire and value advice and real-life practices from Mr. Slott and the entire team.   Thank you.  I have an inquiry for a personal Inherited IRA, now sitting at Vanguard.

I think I understand IRS rules that limit what can be done with an Inherited IRA.  I’m curious to understand from your expertise and if it is prudent to just continue with RMD’s each year versus pay the tax and convert it to a ROTH.

Can your team comment please?  My wife is the holder.  She is currently 64 years of age, while the amount today is plus or minus $87K for the Inherited Traditional IRA.  I am 67-years of age.  At this point, there has been 3 RMD’s taken, by my wife in the $3200 to $3500 range.

Fortunately, the stock market has allowed us to keep the Principal Amount (or higher) from the original amount inherited at $83K, notwithstanding the RMD withdrawals.  That’s has been a good thing, I suppose for her and me too.   Thanks.

Answer:

You are definitely on the right track when it comes to thinking about the tax impact of future RMDs and you are right to consider the advantages of a Roth IRA when it comes to minimizing that impact. However, you are limited by what the tax law allows. Unfortunately, inherited IRAs may not be converted by nonspouse beneficiaries. Converting your wife’s inherited IRA is, therefore, not an option. This is a strange rule because employer plan funds (like a 401(k)] inherited by nonspouse beneficiaries can be converted to a Roth IRA. The tax code is not always logical!

https://www.irahelp.com/slottreport/inherited-iras-and-rmds-todays-slott-report-mailbag-0

Ready To Take

THE NEXT STEP?

 

For more information about any of our products and services, schedule a meeting today.

Or give us a call at (803) 285-0060

Investment advisory services offered through Foundation Investment Advisors, LLC, a SEC-Investment Advisor Representative. Foundation Investment Advisors, LLC does not provide legal or tax advice. Investment Advisor Representatives of Foundation Investment Advisors, LLC may only conduct business with residents of the states and jurisdictions in which they are properly registered or exempt from registration requirements. Insurance and annuity products are sold separately through Chadmere Captial. Securities transactions for Foundation Investment Advisors, LLC clients are placed through TD Ameritrade.