Working through a scenario analysis on a potential $4M inherited traditional IRA from a family member who has already begun RMDs. Before the estate planning conversation gets too far, I want to make sure I have the post-SECURE 2.0 mechanics right.
What I believe to be true:
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As a non-spouse beneficiary inheriting from someone who had already started RMDs, I am subject to the 10-year rule AND must take annual RMDs in years 1-9, with full depletion by year 10. The annual RMD amount is calculated using my own life expectancy.
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If the account were converted to a Roth IRA before death and I inherited a Roth IRA, the annual distribution requirement does NOT apply during the 10-year window, even though the original owner had started Roth distributions. I can defer the entire balance to year 10.
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Inherited IRAs cannot be converted to Roth by the beneficiary after inheritance.
The scenario math if the above is correct:
Scenario 1 (inherit traditional): ~$569k/yr required distribution, 35-37% marginal rate on those distributions given existing household income of ~$280k MFJ, no state income tax. Net after 10 years: ~$3.86M.
Scenario 2 (inherit $4M Roth, tax paid from outside funds): No annual distributions. Compounds at 7% for 10 years. Year-10 value: ~$7.87M. Tax: $0.
Scenario 3 (inherit Roth, conversion tax paid from IRA): ~$1.43M federal tax on conversion. Inherit ~$2.57M Roth. Year-10 value: ~$5.05M. Tax: $0.
Specific questions:
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Is point 2 correct? Does inheriting a Roth IRA truly carry no annual distribution requirement even when the original owner had started distributions, or does the "already in RMD status" rule apply to Roth as well?
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The IRS final regs on SECURE 2.0 had a long saga on this. Are the annual RMD requirements for 10-year-rule beneficiaries fully settled at this point?
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Any other mechanics I'm missing that would change the scenario outcomes?
Inherited IRA mechanics check — does annual RMD requirement during 10-year window apply to inherited Roth as well?
byu/No-Media-36179 intax
Posted by No-Media-36179
6 Comments
I can address question 2 since I had the same scenario. I was a non-spouse beneficiary of my mother’s traditional IRA when she passed in 2021 at 92, so was subject to the SECURE act. The year she died, 2021, she hadn’t taken her RMD yet, so I received that amount. Years 2022-2024, as you mentioned the IRS had not finalized whether an RMD was required for years 1-10 and what it should be. 2025 was the first year a waiver is not granted. I calculated what the minimum I had to withdraw by using the Single Life Expectancy Table as of my age the year after she died, then subtract 1 from that factor for each subsequent year. In reality, I’m probably going to even out my withdrawals over the next 6 years, or front load it, since I’ve got to take my own RMDs in a couple years.
From what I’ve read, there is no RMD for Roth, for either the original owner or the inheritor. But it must be emptied by year 10 by the inheritor or be subject to penalties.
There is no “Already in RMD Status” for Roths. Original owner is not required to make RMDs from a Roth.
Inherited Roth is simply the basic 10-year rule (for most beneficiaries)
Where are you getting a 596k RMD from? What is your age?
> Does inheriting a Roth IRA truly carry no annual distribution requirement even when the original owner had started distributions, or does the “already in RMD status” rule apply to Roth as well?
Roth IRA has no RMD for the original owner, therefore there is no RMD for the beneficiary, except that it must be empty by the end of the 10th year after death. If the original owner was taking distributions from the Roth IRA, those were voluntary, not required, and that does not impose any obligation on the beneficiary to continue them.
I can’t quite tell if you have the RMD calculation correct. You’re right that you use the single life expectancy table and look up the divisor based on your own age, but you only do that for the first year after the original owner’s death. For an inherited IRA, in years 2 through 10 you just subtract 1 from the prior year’s divisor.
If this were your own IRA then you would look up the new divisor every year, so the RMDs for an inherited IRA will be slightly larger than they would be for your own IRA. It sounds like you’re planning to take more than the minimum anyway, so it’s a bit of a fine point that probably won’t affect you.
You’re mostly on the right track, but there’s one important nuance on the Roth side.
For non-spouse beneficiaries under the 10-year rule:
Traditional IRA where the decedent had already started RMDs
You’re correct that annual distributions are required in years 1–9, with full depletion by year 10. That piece has been clarified with the final regs.
Inherited Roth IRA
This is where people get tripped up. Roth owners don’t have lifetime RMDs, so even if they had started taking distributions, it doesn’t trigger the same “already in RMD status” rule the way it does with traditional IRAs.
So generally, no annual RMD requirement during years 1–9 for inherited Roth IRAs under the 10-year rule, just full distribution by year 10.
Your point about inherited IRAs not being eligible for conversion is also correct.
Big thing I’d add to your scenarios is tax rate risk. Scenario 1 assumes fairly stable marginal rates, but if income spikes or rates change, that $569k/year could get more expensive than modeled.
Also worth thinking about timing flexibility. The Roth scenario gives you full control over when distributions happen inside that 10-year window, which has real planning value beyond just the compounding.
Overall your framework is solid, just that Roth nuance is the main place people mix up the rules.
Adding to what’s been said:
Point 2 is correct *because* it’s an IRA. If the person you inherited from had money in a traditional 401k/403b/etc. and also had money in a Roth 401k/etc., you *would* be required to take RMDs from both the traditional plan & the Roth. This does not apply if they had no money in a traditional 401k/etc. and *only* had money in the Roth side, and it does not apply to IRAs at all.
For scenarios 2 & 3, note that when converting to Roth, the increased AGI often causes other effects on that return, such as bumping more income up to be subject to NIIT and phasing out of various credits and deductions. It also can affect other things, like increasing IRMAA (Medicare premium) two years later. It’s easy to overlook that stuff and wind up underestimating the actual cost of the conversion.
Spreading the conversions out over multiple years can save on tax, if that’s an option.
If you wind up inheriting a tradIRA, I highly recommend using some of the distributions to fund contributions to your own work retirement account(s) to effectively continue to defer the tax on that money. If it makes sense to have an HSA-eligible health insurance plan, then you can max your HSA contributions as well for the same effect. You’re likely to wind up over the AGI limit to deduct contributions to a traditional IRA, and over the limit to make direct Roth contributions, but if you don’t have existing money in a tradIRA (or if you can roll your tradIRA balance into a work retirement plan), you can make backdoor Roth contributions – doesn’t help you now, but it helps you a bit later.
Also note that you *cannot* make QCDs from an inherited tradIRA unless you yourself are age 70.5+. (If you’re of that age, then they’re a great option if you want to give money to charity, especially if you aren’t able to itemize deductions or aren’t sure if you’ll itemize.)