Do Roth IRAs Have Mandatory Distributions?
The absence of mandatory distributions for a Roth IRA applies uniquely to the original owner, with different requirements for heirs and Roth 401(k)s.
The rules for mandatory withdrawals from a Roth IRA are not uniform for everyone. The requirements change significantly depending on whether you are the person who opened the account or someone who inherited it. Understanding these differences is necessary for proper retirement and estate planning.
The Rule for the Original Roth IRA Owner
For the individual who establishes a Roth IRA, the rule is straightforward: you are not required to take any distributions during your lifetime. This feature distinguishes Roth IRAs from Traditional IRAs, which are funded with pre-tax money and require owners to take Required Minimum Distributions (RMDs) starting at age 73. The reason for this rule is that you fund a Roth IRA with after-tax dollars, so the Internal Revenue Service (IRS) has no incentive to force withdrawals.
The absence of lifetime RMDs for Roth IRA owners provides greater flexibility, allowing the account to continue growing tax-free for as long as the owner lives.
Distribution Rules for Roth IRA Beneficiaries
The distribution rules change upon the death of the original Roth IRA owner, as the lifetime withdrawal exemption does not carry over for most individuals. The requirements depend on the beneficiary’s relationship to the deceased. A surviving spouse who is an “eligible designated beneficiary” can treat the inherited Roth IRA as their own and is not required to take RMDs during their lifetime.
Non-spousal beneficiaries face different regulations. Following the SECURE Act, most are subject to a 10-year rule, which mandates the entire account balance be distributed by the end of the tenth year after the owner’s death. While these distributions are tax-free, this requirement eliminates the long-term growth potential that “stretch IRA” strategies previously offered.
A Note on Roth 401(k) Accounts
It is important to distinguish Roth IRAs from Roth 401(k)s, as their distribution rules have historically differed. Until recently, Roth 401(k)s were subject to RMDs for the original account owner once they reached the required age. The SECURE 2.0 Act eliminated this inconsistency, and starting in 2024, RMDs are no longer required from Roth 401(k) accounts for the original owner.
Before this change, a common strategy was to roll over funds from a Roth 401(k) into a Roth IRA to avoid these RMDs. While this maneuver is no longer necessary for that purpose, a rollover may still be advantageous for other reasons, such as gaining access to more investment options.