IRS Delays Required Minimum Distributions
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By Ben Dolan, CFP®
If you are a non-spouse beneficiary of a Traditional IRA, and the decedent from whom the IRA was inherited died in 2020 or after and was already taking Required Minimum Distributions (RMD), you are no longer required to take an RMD in 2024. Per Notice 2024-35, the IRS has again delayed the requirement to begin withdrawals from the account.
This is great news for some. For those of you currently in a high tax bracket, but likely to be in a low tax bracket soon, delaying a RMD could provide a tax savings. For example, if you inherited an IRA from a parent in 2020 the account must be depleted by 2030. Let’s say you plan to retire from a highly compensated position in 2024 and, starting in 2025, your income will be greatly reduced. In this case, the delay will provide you with tax savings.
Delaying may not be the best strategy for all. As Ashlea Ebeling points out in her April 17th article in the Wall Street Journal, “a 66-year-old who inherited a parent’s $200,000 IRA in 2020 would have had to take out about $26,000 so far if it weren’t for the IRA relief through 2023.” In other words, if you delayed RMDs by taking advantage of the IRS rules, and your income is steady, the amount you might be required to take each year going forward may push you into a higher tax bracket. After all, RMDs are considered ordinary income.
Understanding which strategy is best requires paying close attention to your income and planning appropriately. At DCA, we use our expertise to help reduce our clients’ tax burden.
Note, those non-spouse beneficiaries that inherited an IRA prior to 2020 can stretch RMDs over the course of their lifetime, per an IRS table.
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