Author Topic: Roth IRA question re. required minimum distributions  (Read 1129 times)

rudged

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Roth IRA question re. required minimum distributions
« on: July 18, 2017, 09:33:02 AM »
I've repeatedly read that Roth IRAs do not involve required minimum distributions (RMD) because the owner of the account has already paid taxes on the money invested in the Roth IRA. Yesterday I read in a brochure from TIAA entitled Receiving Required Minimum Distributions (which discusses RMDs with reference to all types of retirement accounts) the following sentence on page 13:

"Although the minimum distribution rules don't apply to owners of Roth IRAs, they do apply to beneficiaries of these IRA."

What? Could someone talk me down on this? I don't think it is a reference to the estate tax that might pertain to someone with an estate in excess of 5 million dollars.

CNM

  • Bristles
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Re: Roth IRA question re. required minimum distributions
« Reply #1 on: July 18, 2017, 09:57:30 AM »
According to TIAA, the minimum distributions do not apply to Roth IRAs.

https://www.tiaa.org/public/pdf/minimum-distribution.pdf

Secretly Saving

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Re: Roth IRA question re. required minimum distributions
« Reply #2 on: July 18, 2017, 10:11:34 AM »
Maybe this will help make it clear:

Let's say my mom has a Roth IRA and it has been open for five years.  She NEVER has to take RMDs from it while she is living because this was all after tax money (the government was already paid).  She can intentionally pass the money on to me (or even better onto my children.) when she dies.   Eventually, she dies and I am the beneficiary of the account.  I do have to take RMDs of the money, BUT I do not have to pay taxes on it as long as the Roth account has been open for five years.  The amount required to withdraw each year is based on my age and life expectancy.  Here is a calculator that can help you determine how much might have to be taken out over time. 

http://www.schwab.com/public/schwab/investing/retirement_and_planning/understanding_iras/ira_calculators/beneficiary_rmd




rudged

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Re: Roth IRA question re. required minimum distributions
« Reply #3 on: July 18, 2017, 10:17:58 AM »
Thanks. I have to share it seems odd that there would be minimum required distributions in the absence of taxes. I thought the whole point behind minimum required distributions is to force the owner to pay taxes.

Proud Foot

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Re: Roth IRA question re. required minimum distributions
« Reply #4 on: July 18, 2017, 12:45:36 PM »
Yes the RMD's are to force distributions to create taxes.  With regards to inherited Roths it is the same although not direct taxes like an IRA or 401k.  The intent is to get the money back into circulation where it will incur taxes as it is spent, earnings if it is invested, deferred in a typical IRA. Yes the beneficiary could turn around and put it back into their personal Roth IRA and avoid the taxes that way but with the restrictions on contributions make the amount small compared to potential RMD's.

Without the RMD's on inherited Roth IRA's you could theoretically have one person put enough money in their Roth to pass on a substantial amount that will continue to grow and be passed on to the point where the money will never be taxed and the heirs would not have to work and can live off the distributions.

rudged

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Re: Roth IRA question re. required minimum distributions
« Reply #5 on: July 18, 2017, 01:52:11 PM »
Thanks!