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Old 12-22-2009, 06:54 AM   #41
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Since a non-spousal inherited Roth has required minimum distributions, how does it go on for hundreds of years?

OTOH, I can see how a taxable account could go on tax-free because each time it gets inherited the investments could get a stepped up basis.

But stocks in Roth if you have room for all fixed income in 401(k) or traditional IRA makes sense ... as long as the stocks don't lose money and/or become worthless.
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Old 12-22-2009, 11:00 AM   #42
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LOL! I had the same question myself..........non-spouse inheritor can name beneficiaries but doesn't RMD schedule stay fixed based on original inheritor.....I suppose if a newborn was original inheritor.........but that still would be pushing it. Actually what was said was a hundred yrs or more (not hundreds of yrs) so a combination of spouse inheriting and then a newborn could get you over a hundred.
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Old 12-22-2009, 11:06 AM   #43
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From Farimark.com: Inherited Roth IRA

Quote:
For a [Roth IRA] beneficiary other than a spouse, distributions must satisfy one of the following rules:
  • Rule 1: Receive the entire distribution by December 31 of the fifth year following the year of the owner's death.
  • Rule 2: Receive the entire distribution over your life, or over a period not extending beyond your life.
The original owner may have specified which rule applies in the document used to set up the Roth IRA. More often, the choice is left to the beneficiary. If the choice is yours, you have to choose by December 31 of the year following the year the death occurred, because that's the last day to start receiving distributions under Rule 2.
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Old 12-22-2009, 01:41 PM   #44
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THE ANSWER IS: because the gains in your equities should surpass in growth the required distributions ...these roths can go on a very very long time. each generation can actually end up with more then they started. the distributions are pretty small if your grand kids are beneficiares as well. dont forget rmds are based over their lifetime all the while compounding at a far greater rate. roths rmd's are based on the lifetime of the beneficiaries .

thats why you need the historical power of equities in the roths and not bonds.. although the last decade didnt hold true. non the less i think longer term equities will still win out.


http://www.fairmark.com/rothira/inherit.htm
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Old 12-22-2009, 03:13 PM   #45
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Mathjak....I think what LOL! was trying to say is that you can't get over a hundred yrs stretch w/ a non-spouse beneficiary only. Hopefully this is the right table......it shows a max of 82+ yrs stretch (still pretty long tho)
Single Life Expectancy Table for Inherited IRAs
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Old 12-22-2009, 07:53 PM   #46
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depending when you start yours and if grandchildren are beneficiaries i think it will go over 100
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Old 12-23-2009, 03:56 AM   #47
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Quote:
Originally Posted by kaneohe View Post
Mathjak....I think what LOL! was trying to say is that you can't get over a hundred yrs stretch w/ a non-spouse beneficiary only. Hopefully this is the right table......it shows a max of 82+ yrs stretch (still pretty long tho)
Single Life Expectancy Table for Inherited IRAs

thats just one person, the gains usually far out pace the withdrawls so its possible for your beneficiary to even end up with more then they even inherited.. i forget the numbers in ed slots book he used but they were mind blowing.. so you got your lifetime to compound tax free, your beneficiaries lifetime and if your beneficiary is a grand child that money would probley go on forever to be passed on ...it all depends on the gains outpacing the rmds......
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Old 12-23-2009, 08:30 AM   #48
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mathjak........wasn't questioning the fact that gains could far outpace withdrawals. Just the fact that it would go on forever WITHIN the Roth. I think the table I referenced shows that a newborn would have to use an initial lifetime in the RMD of 82.4 yrs and then reduce it by 1 each yr (small words on the top). After 82 (or 83?) iterations the divisor becomes less than 1 which means the Roth is over. Since the non-spouse beneficiary can name new beneficiaries but the RMD calculation does not change when the first beneficiary dies, the Roth ends at that point. As you stated, the Roth can go over a hundred yrs if you start counting when you started it plus more for a spouse beneficiary plus the final 82or 83 yrs if you have the first non-spouse beneficiary be
a newborn..........but it can't go on forever as a Roth. Still you could have a pretty big pile of dough there in a taxable account.
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Old 12-23-2009, 09:46 AM   #49
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exactly, yes counting your own and grandchildren i think ed slott came up with 103 or 106 years but thats not counting your heirs funding their own roth with the tax free rmd's so that keeps the clock going too... none the less its a very powerful tool for passing tax free money...

unlike the 2nd best which is appreciated equities in a taxable account which steps up in basis but looses first place because it dosnt compound tax free for the heir and there may be taxable dividends and interest along the way unlike the roth.
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