Spousal IRA RMD Rules for a Surviving Spouse

When a person inherits an Individual Retirement Account (IRA) from a deceased spouse, they are met with a unique set of rules. A spousal IRA is the retirement account passed to a surviving spouse, who has specific options for managing the funds. Central to this is the Required Minimum Distribution (RMD), the amount the federal government mandates you withdraw annually from most retirement accounts after reaching a certain age. For a surviving spouse, the regulations governing these withdrawals depend on the path the survivor chooses for the inherited assets, a decision that dictates when RMDs begin and how they are calculated.

Key Beneficiary Decisions for a Spousal IRA

A surviving spouse has two primary options when inheriting an IRA, and this initial choice determines all future RMD obligations. The first path is to treat the IRA as their own. This is most commonly accomplished through a spousal rollover, where the funds from the deceased’s IRA are moved into a new or existing IRA in the surviving spouse’s name. The account is then treated as if it had always belonged to the survivor, meaning future RMDs will be based entirely on the surviving spouse’s own age and life expectancy.

This option allows the funds to continue growing tax-deferred and can be particularly advantageous for a younger surviving spouse. By rolling the assets over, they can delay the start of mandatory withdrawals until they reach their own required beginning date, currently age 73 or 75 depending on their birth year. This strategy maximizes the period of tax-advantaged growth.

The second option is to remain a beneficiary of the IRA, which is then retitled as an “inherited IRA.” The account remains in the deceased spouse’s name for the benefit of the survivor. With this choice, the RMD rules are linked to the deceased spouse’s age at the time of their death. This path might be preferable for a surviving spouse who is under the age of 59½ and may need to access the funds, as distributions from an inherited IRA are not subject to the 10% early withdrawal penalty.

RMD Rules When Treating the IRA as Your Own

Once a surviving spouse elects to treat the inherited IRA as their own through a rollover, the RMD rules align with those for any standard IRA owner. The inherited assets are combined with the survivor’s own IRA funds, and all calculations are based on the survivor’s circumstances. This decision is irrevocable; once the funds are rolled over, they cannot be moved back into an inherited IRA status.

The timing of RMDs is dictated by the surviving spouse’s date of birth. Mandatory distributions must begin by April 1 of the year following the year the survivor reaches their own RMD age. Under the SECURE 2.0 Act, this age is 73 for individuals born between 1951 and 1959, and it will increase to 75 for those born in 1960 or later.

To determine the annual RMD amount, the surviving spouse uses the Uniform Lifetime Table from the IRS. The calculation involves dividing the IRA’s fair market value as of December 31 of the preceding year by the life expectancy factor corresponding to the spouse’s age for that year.

RMD Rules When Treating as an Inherited IRA

When a surviving spouse chooses to remain a beneficiary and establishes an inherited IRA, the RMD rules are contingent on whether the deceased spouse had started taking their own RMDs. As an “Eligible Designated Beneficiary,” a surviving spouse receives more flexible options than other types of beneficiaries. The specific path depends on the deceased’s age at death relative to their required beginning date (RBD).

Deceased Spouse Died BEFORE Their Required Beginning Date

If the original IRA owner passed away before reaching their RBD, the surviving spouse has several choices. One option is to delay RMDs until the year the deceased would have reached their RMD age, with distributions then calculated using the survivor’s single life expectancy. Another choice is to begin taking distributions over their own life expectancy, starting by December 31 of the year following the owner’s death.

A third option is the 10-year rule, which requires the entire account to be distributed by the end of the 10th year following the owner’s death. This rule offers flexibility as no annual RMDs are required during this period. A spouse who initially treats the IRA as inherited can, at any point, choose to roll it over into their own IRA, a flexibility not afforded to non-spouse beneficiaries.

Deceased Spouse Died ON or AFTER Their Required Beginning Date

If the deceased spouse had already begun taking RMDs, the surviving spouse must continue receiving distributions. The year-of-death RMD for the decedent must be taken by the beneficiary if it was not withdrawn before death. For all subsequent years, the RMD calculation is based on a comparison of life expectancies.

The annual withdrawal is determined using the longer of two possible timeframes: the surviving spouse’s single life expectancy or the deceased spouse’s remaining life expectancy had they lived. This “longer of” rule is beneficial because it results in a smaller required withdrawal. The surviving spouse would consult the IRS Single Life Expectancy Table for their own age and compare that factor to what the deceased’s life expectancy factor would have been, then use the larger factor to calculate the RMD.

Calculating and Withdrawing Your RMD

To take a withdrawal, you must first determine the correct RMD amount based on the rules that apply to your situation. You will need the fair market value of the IRA from the account statement for December 31 of the previous year. You will also need the correct life expectancy factor from the applicable IRS publication, either the Uniform Lifetime Table or the Single Life Expectancy Table.

To execute the withdrawal, you must contact the financial institution that serves as the custodian for the IRA. You will instruct them to distribute the calculated RMD amount. This withdrawal must be completed by the annual deadline of December 31. When requesting the distribution, the custodian will ask if you want to have federal or state income taxes withheld, as distributions from traditional IRAs are taxable as ordinary income.

Consequences of a Missed RMD

Failing to withdraw the full RMD amount by the deadline results in a penalty. The IRS imposes an excise tax on the shortfall, which is the amount that should have been withdrawn but was not. Under current regulations, this penalty is 25% of the RMD shortfall.

There is a provision for reducing this penalty. If the mistake is corrected in a timely manner, the penalty can be lowered from 25% to 10%. This correction involves withdrawing the required amount and filing the appropriate tax forms within a specific “correction window.”

In certain situations, the IRS may waive the penalty entirely. A waiver can be requested if you can demonstrate that the failure to take the RMD was due to reasonable cause and that you are taking steps to remedy the shortfall. To request a waiver, you must file IRS Form 5329 with your federal tax return for the year the RMD was missed.