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"I have set up an inherited IRA (non-spousal). Dad passed on May 2011 . I was planning on taking the RMD before December this year. However, i have sufferd loses in the IRA of about 75%. I am 58 so instead of taking RMD on the original 37,000, do I just?

take it on what is left, 10,000. I assume the required RMD every year is independent of the amount as this could increase or decrease ( as mine did) I do realize there are other options such as just taking it all out but, I want to keep it in the investments in case the stock prices come back. Thanks

Oct 28, 2012 by William in  |  Flag
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If your account balance was 25000 on December 31, 2011, 25000 divided by 27 is your RMD which must be withdrawn by December 31, 2012. This amount will be reported on your form 1040 as ordinary income.

Comment   |  Flag   |  Oct 29, 2012 from Green Bay, WI

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Herbert N Glass Level 18

If your Dad passed before he reached his "Required Beginning Date," that is the date that he would have had to begin taking RMDs himself, the first RMD that you must take begins the year after his passing. Therefore, you must begin taking your RMDs in this 2012 year and no later than December 31, 2012. Your 2012 RMD is based on the balance of his account (or the value of the inherited IRA, if his account balance was transferred to such IRA in 2011) as of December 31, 2011. It would be incorrect to base the 2012 RMD on an amount lower than such balance even though you suffered loses during 2012.

Your assumption that the "RMD every year is independent of the amount" is not correct because the calculation for each years RMD is based on the prior year end value of the IRA. Therefore, your RMD for 2013 will most likely be far less than that of 2012.

I am sorry for your loss, however, I hope this information helps you.

View all 6 Comments   |  Flag   |  Oct 28, 2012 from Franklin, MI
Herbert N Glass

William, you are correct, it really did not make any difference if you moved the money to the inherited IRA in 2011 or 2012. I only mentioned what the basic rule is so that other readers would know that beneficiaries do not have to rush and decide what to do until the year after the death occurs. If that were not the rule and beneficiaries had to be determined during the year of death and then the beneficiaries had only until the end of such year to move the money, how could that all be done if someone died on December 28th?
But, I must nott have been clear, you would not use the 37,000 "original" amount because that amount is not the value of the funds as of 12/31/2011. You say the value is $25,000 on 12/31/2011, so that is the value you use for your RMD calculation to calculate the correct amount that must be paid out to you by 12/31/2012. Then when you do your calculation for your RMD for 2013, you use the value on 12/31/2012 (making sure that that value does not include the RMD amount paid out to you in by the end of 2012). Take another look at Tony Krance's answer. I agree with his numbers. He looked up your life expectency for your 2012 distribution and came up with 27 years. That means that each year thereafter you would take the value of the account at the end of the previous year and for the 2013 RMD calculation you divide the 12/31/12 value by 26, then to get the RMD for 2014, you divide the 12/31/13 value by 25, etc. (that is, for each additional year that you calculate the RMD, you subtract 1 from the previous years life expectancy to use in the formula). I hope this adequately answers your question.

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Flag |  Oct 30, 2012 near Franklin, MI

Ok thanks again. I assume a RMD is just that, a minimum and one could take more out if they chose to and at any other time?

Flag |  Nov 01, 2012

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