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How do I model inherited IRA withdrawals?
How do I model inherited IRA withdrawals?

This article will show you how to model manual inherited IRA withdrawals.

Nancy Gates avatar
Written by Nancy Gates
Updated over a week ago

The Planner automatically calculates RMDs when the account owner reaches age 72 or later based on the IRS Uniform Lifetime table (or the IRS Joint and Last Survivor table if you have a Spouse that is more than 10 years younger). However, there are scenarios, such as inheriting an IRA, where someone would need to take RMDs at a younger age or based on a different IRS table. Once you have entered the IRA account, you have the ability simulate any withdrawals that are required or planned in the Money Flows section of My Plan as individual transactions, or Transfers.

When the SECURE Act passed at the end of 2019, it changed the RMD rules for inherited accounts for people who inherited in 2020 or later, while accounts already inherited prior to the Act keep their previous RMD rules. For people who inherited in 2020 or later the "stretch IRA" has been eliminated except for special categories called eligible designated beneficiaries, which include a spouse. For non eligible designated beneficiaries, everything has to come out by the end of the 10th year after death, even with a Roth IRA. In sum, there are now different requirements for each type of beneficiary category. For example, if you are not an eligible designated beneficiary, you will need to decide if you want to take a lump-sum withdrawal or spread out the transactions over 10 years. This article describes the method you will use to model your inherited IRA distributions for IRAs inherited prior to the Act and subsequent to the Act.



Follow these steps if you currently have an inherited IRA account:

Step 1: Set up an Inherited IRA as an account

First, go to My Plan > Accounts and Assets, enter the inherited IRA account. You can enter the account manually with it's current balance or link to a financial institution. You also will need to exclude this account from auto withdrawals. By excluding from auto withdrawals, this account will not be subject to the Planner's default expense hierarchy and it will not be included with your other applicable accounts for RMD projections.

Step 2: Set up manual Transfers

Next, go to My Plan > Money Flows > Transfers. Use transfers to model your applicable distributions from the Inherited IRA account to the destination account. You'll need to confirm what applies to you:
- Do these RMDs follow stretch rules to take distributions over your lifetime?
- Do these RMDs follow rules where you need to take the entire account balance within 10 years? This can be done in any combination of your choosing i.e. lump sum, annual even payments, etc.


There is a notes field below to help you label the transactions. Note that your withdrawal amount should account for growth in the Inherited IRA account.


Step 3: Confirm withdrawals on the insights charts

Finally, go to Insights > Savings. Scroll to the bottom chart labeled "Withdrawals." Drag the cursor over the bars on the chart to see detailed information per year in the chart. Validate that your withdrawals have been added accurately.


Follow these steps if you want to model a future inherited IRA account:

Step 1: Set up an Inherited IRA as an account

This follows the same steps and notes as above except that you enter the account balance as $0.

Step 2: Set up a Windfall

Go to My Plan > Income > Windfall to model the future inheritance coming into your plan. Note: the amount listed should be in future dollars.

Step 3: Set up manual Transfers

This follows the same steps and notes as above.


Step 4: Confirm the windfall and withdrawals on the insights charts

This follows the same steps and notes as above. Both charts are found in Insights > Savings.


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