How should I enter an inherited IRA for a non-spousal beneficiary? The distributions are required to be made over the beneficiaries life expectancy. The beneficiary is under age 59 1/2, but the 10% penalty does not apply since it's an inherited IRA. The account will obviously need to grow on a tax-deferred basis. And the required distributions will be taxed 100% at ordinary income tax rates.
Thanks.
Rick
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Has anyone from ESPlanner had a chance to give some thought to a possible workaround for this problem? Just hoping someone will get back to me. Thanks. Rick.
Wish we could say that we had, but no, we've been focused elsewhere. No current plans to look at it either.
Best,
Dick Munroe
You can simply add the inherited IRA to your current IRA holdings if you don't intend to spend the funds until age 59.5. Or you can simply do a side calculation on how much you'll have when you start withdrawing and then enter the withdraws as taxable receipts. Or you can call me at 617 834-2148 if this isn't clear or answering the question.
best, Larry
How should I enter an inherited IRA for a non-spousal beneficiary? The distributions are required to be made over the beneficiaries life expectancy. The beneficiary is under age 59 1/2, but the 10% penalty does not apply since it's an inherited IRA. The account will obviously need to grow on a tax-deferred basis. And the required distributions will be taxed 100% at ordinary income tax rates.
The way I am handling this is:
1. Assuming the money distributed from ben IRA has a goal of being used for retirement, therefore is reinvested in a non-qualified account when received before retirement,
2. WIll have to pay taxes on each payment when the RMDs are due annually starting immediately,
3. Will have to pay taxes on reinvested fund growth when it is used for retirement later,
4. Therefore, and I know this is extremely crude...I am simply assuming a higher global tax rate to try to account for the taxes imposed on the income along the way. I know this does not capture all of the possible problems, but it will capture one primary issue and that is the higher tax rate the IRA receipts will cause along the way.
5. Trying to estimate the IRA payments and take them as distributions would be a nightmare and full of errors. My way, we eliminate the nightmare and keep the errors. It' ugly, but it's something!
I still like my answer posted above. Estimating the IRA payments, assuming they are smooth,is pretty easy usig the PMT function in Excel. best, Larry