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Author: codger41 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76406  
Subject: max roth beneficiary distrib? Date: 12/24/2010 8:23 AM
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If a Roth passes to a nonspousal beneficiary there are certain periodic withdrawal requirements, i.e., the total account must either be withdrawn within 5 years or else the account be withdrawn over the life expectancy of the beneficiary in periodic payments. My question is whether or not a beneficiary, having selected the periodic lifetime withdrawal method, can draw the account down faster than the required minimum distribution? Asked differently, is the minimum required distribution also a maximum distribution?
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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67937 of 76406
Subject: Re: max roth beneficiary distrib? Date: 12/24/2010 12:49 PM
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codger41: "If a Roth passes to a nonspousal beneficiary there are certain periodic withdrawal requirements, i.e., the total account must either be withdrawn within 5 years or else the account be withdrawn over the life expectancy of the beneficiary in periodic payments. My question is whether or not a beneficiary, having selected the periodic lifetime withdrawal method, can draw the account down faster than the required minimum distribution?

Asked differently, is the minimum required distribution also a maximum distribution?"


I am about 99% certain that the answer to this question is no; the non-spousal beneficiary may withdraw more. You may want to wait for one of the resident pros to weigh in.

Regards, JAFO

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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67938 of 76406
Subject: Re: max roth beneficiary distrib? Date: 12/24/2010 2:45 PM
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For TIRA, RIRA and qualified retirement plan named beneficiaries who are individuals, the "M" in MRD or RMD means 'minimum'. That is, the IRS requires that these inherited account balances must be drawn down at a minimum rate. (for spousal beneficiaries, they can roll over the inherited balance into their own IRA and treat as their own)

The IRS has no restriction on maximum withdrawals. Indeed, one of the common behaviors of young adult beneficiaries is to, as soon as it is available, withdraw the entire inherited account balance regardless of the tax consequences.

Except in the cases of beneficiaries who are minors or incompetents, or in some states, certain spend-thrift trusts (I've heard, but have no experience with), the rate of withdrawal, as long as it at least meets the IRS required minimum rates, is entirely up to the beneficiary.

With the 5-year rule, the IRS minimum is that the account be fully withdrawn by the end of the 5th year beginning the year following the year of death. How much and when account withdrawals occur is entirely up to the beneficiary.

BruceM

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Author: codger41 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67947 of 76406
Subject: Re: max roth beneficiary distrib? Date: 12/27/2010 11:38 AM
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Thanks, Bruce

I have been trying to fund Roth IRAs for the benefit of my two children, hoping to create a supplemental retirement income source for them. I am hoping that they will select the periodic withdrawal method rather than the 5 year option. Alas, if they can withdraw more than the annual minimum required disbursement the lifetime retirement legacy may not work.

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67949 of 76406
Subject: Re: max roth beneficiary distrib? Date: 12/27/2010 12:52 PM
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I have been trying to fund Roth IRAs for the benefit of my two children, hoping to create a supplemental retirement income source for them. I am hoping that they will select the periodic withdrawal method rather than the 5 year option. Alas, if they can withdraw more than the annual minimum required disbursement the lifetime retirement legacy may not work.

Sounds to me like you are trying to set controls on the money you plan to leave to your children, even after you die. The way to do this is not by using beneficiary accounts - it's by setting up trusts with distribution rules. If you are that concerned about how your children are going to spend the money that you leave them, you need to get yourself to an estate planning specialist.

AJ

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67951 of 76406
Subject: Re: max roth beneficiary distrib? Date: 12/27/2010 2:12 PM
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I have been trying to fund Roth IRAs for the benefit of my two children, hoping to create a supplemental retirement income source for them.

I've matching my kids' Roth contributions since they each started working. But I've also spent a lot of time helping them learn about personal finance through the years. My youngest who is 23 is the executor of the estates after my spouse and me. If they are going to get a bunch of money, I'd rather have them know how to handle it rather than dribble it out to them. I suspect if the 3 of them got it right now, they might go together to buy a business and I'm fine with that.

That youngest kid ? He got the maximum match on his Roth since he started working at 16.

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