Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Planning tool for inherited IRA?
Old 09-19-2021, 05:01 PM   #1
Recycles dryer sheets
BOBOT's Avatar
 
Join Date: Aug 2006
Posts: 461
Planning tool for inherited IRA?

DW has an inherited IRA, & we're trying to figure how to comply with and implement the 10 year rule for liquidating it. Many unknowns, of course, including future returns, tax rates, etc., others we haven't thought of.

A spreadsheet sort of analysis tool would help; any out there?
Thanks.
__________________
I still don't get it...
BOBOT is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-19-2021, 05:28 PM   #2
Recycles dryer sheets
 
Join Date: Jul 2014
Posts: 374
Do either of the spreadsheets mentioned in Roth IRA conversion - Bogleheads help?

Of course, these won't be conversions for her but the general principles of calculating taxes for various withdrawal amounts may still apply.
SevenUp is offline   Reply With Quote
Old 09-19-2021, 07:59 PM   #3
Full time employment: Posting here.
RetiredHappy's Avatar
 
Join Date: Jun 2021
Posts: 624
You can make use of the last 10 years of the IRA RMD table, I think age 110 to 120 or something like that, to help you decide how much to withdraw for each of the 10 years.
RetiredHappy is online now   Reply With Quote
Old 09-20-2021, 12:06 AM   #4
gone traveling
 
Join Date: Oct 2007
Location: Willamette Valley, Oregon
Posts: 1,979
Inherited IRAs for non spouses do have the ten year withdrawal requirement but there are no specified RMD's for each year. So, she can take it all out year one, or all year ten, or just about any combination that fits her specific needs and or wants.

In order not to have a possibly huge tax hit in any one year, maybe she would want to let the account ride for the first five years with no withdrawals. Then take withdrawals in years six through ten to even out the tax hit. This sort of strategy would take advantage of much tax-deferred growth before the account starts getting depleted. And it also keeps the tax hit from hitting all in one year at possibly greater tax rates due soley to size of WD all in one year.

Maybe you want to sit down and model how to minimize tax hit while also allowing some years of continued tax deferral before depleting starts.
RetireeRobert is offline   Reply With Quote
Old 09-24-2021, 09:13 AM   #5
Recycles dryer sheets
 
Join Date: Oct 2020
Posts: 318
If you are good at spreadsheets, you could try something like the Retiree Portfolio Model available at the Bogleheads.org Wiki. In the model, call the inherited IRA as IRA 1 and not an inherited IRA, if you call it IRA 1, you have more flexibilty on withdrawals. Then set up Roth conversions and Roth withdrawals over the 10 year withdrawal period (which come from IRA 1). Make conversions and withdrawals the same in any given year and it nets out to pulling the money out of the IRA and putting it in taxable. Then try different withdrawal strategies.

But a warning - it's a very complex and thorough tool so it takes time to learn and get your inputs set up in a reasonable fashion. Since the goal here is to maximize future wealth primarily by minimizing taxes, you will need to put in quite a bit of detail so it can reasonably estimate taxes. You have to be patient to learn the tool, I still find I have to scroll through the entire input to find what I'm looking for.
Exchme is offline   Reply With Quote
Old 09-24-2021, 09:18 AM   #6
Recycles dryer sheets
 
Join Date: Jul 2018
Posts: 166
Must Inherited IRAs for non spouses start the year they die?
Bruno is offline   Reply With Quote
Old 09-24-2021, 09:41 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Sunset's Avatar
 
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 12,317
How fast to withdraw the money , depends a lot on other income as the withdrawal will add to the other income.

If a future drop in income is expected (ie retirement), then it can be planned to make larger withdrawals during that time.

If the income over the next 10 years is pretty constant, then making the withdrawals even is best. Obviously 10% is too low as the money will hopefully grow.

Here is a calculator to figure out exactly how much to withdraw in the even amount case , so OP can play with the inputs :
https://www.bankrate.com/calculators...ator-tool.aspx

With a average 6% growth rate, and withdrawals of 12.9% the account is $0 after 10 years. Naturally at any point based on actual growth the withdrawal could be adjusted.
Attached Images
File Type: png withdrawal from IRA .png (122.8 KB, 21 views)
__________________
Fortune favors the prepared mind. ... Louis Pasteur
Sunset is offline   Reply With Quote
Old 09-25-2021, 03:23 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 5,824
Quote:
Originally Posted by Bruno View Post
Must Inherited IRAs for non spouses start the year they die?
Nope. It is the year after death.

In the year of death, the original owner (or their beneficiaries) must take their full and final RMD, if applicable.
SecondCor521 is online now   Reply With Quote
Old 09-25-2021, 03:37 PM   #9
Thinks s/he gets paid by the post
MuirWannabe's Avatar
 
Join Date: Oct 2009
Posts: 1,674
Quote:
Originally Posted by SecondCor521 View Post
Nope. It is the year after death.



In the year of death, the original owner (or their beneficiaries) must take their full and final RMD, if applicable.

This raises a question Iíve got right now. Iím finally about to have an inherited IRA placed into a new account for me. Raymond James has been dragging their feet. But it should actually happen this next week.

But itís complicated. The dad died in May. The mom died in June. Neither took their RMD for 2021. Since technically, mom inherited dads IRA even before she passed three weeks later, RJ has decided to combine their IRAís into one inherited IRA from mom.

So, it raises a few questions.

1. How long do I have to take their 2021 RMDís?I donít even gave the money quite yet.
2. Do I take two RMDís? One based on dads age and one on moms? Iím guessing thatís not correct since the IRAís have been combined. However, if not, that means technically dad did not have an RMD taken in 2021.
3. Do I take one RMD of the entire combined amount based upon moms age?

Raymond James is no help. They are struggling just getting my inherited account established and the money transferred. I think they just discovered this thing called the SECURE act and itís got them all flustered lol.
__________________
ďOf all the paths you take in life, make sure a few of them are dirt.Ē John Muir
MuirWannabe is online now   Reply With Quote
Old 09-25-2021, 06:26 PM   #10
Full time employment: Posting here.
 
Join Date: Feb 2021
Posts: 662
Quote:
Originally Posted by MuirWannabe View Post
The dad died in May. The mom died in June. Neither took their RMD for 2021. Since technically, mom inherited dads IRA even before she passed three weeks later, RJ has decided to combine their IRAís into one inherited IRA from mom.

So, it raises a few questions.

2. Do I take two RMDís? One based on dads age and one on moms?
I am NOT a tax professional. This is probably a convoluted enough story to involve one to make sure it gets done properly and doesn't come back to bite you later.



That said, you aren't inheriting dad's IRA. Your mom inherited that. It was her responsibility to take his 2021 RMD.


You are inheriting mom's IRA. It is your responsibility to take her 2021 RMD.


At least that's how I would interpret this situation.
disneysteve is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Will SECURE act IRA rules affect inherited IRA from 2014? Yarnstormer FIRE and Money 11 04-27-2021 06:04 PM
Is a Reverse Mortgage a viable planning tool? Markola FIRE and Money 60 09-23-2020 11:39 AM
Fidelity Retirement Planning Tool Question Jerry1 FIRE and Money 14 04-30-2017 08:39 AM
Advice on withdrawals from inherited IRA? mb FIRE and Money 1 07-28-2008 09:38 PM
Inherited IRA, when to take RMD this year? Gworker Other topics 11 01-28-2008 01:38 PM

» Quick Links

 
All times are GMT -6. The time now is 03:45 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.