When to begin MRDs
MRD rules dictate not only how much, at a minimum, you are required to withdraw from an IRA, but when you must begin taking those distributions, as well. Generally, you must begin taking MRDs for Inherited IRA assets by December 31 of the year after the year of the original owner’s death.
Automate your withdrawals
One of the easiest ways to ensure you're meeting your MRD is to take advantage of your Fidelity IRA’s automatic withdrawal service. If you choose this option, based on the information you provide, Fidelity will:
- Automatically calculate the MRD you need to withdraw from your Inherited IRA assets each year.
- Direct those distributions to you, your bank account, or into a Fidelity nonretirement account that you specify.
- Notify you annually each January of your MRD amount and schedule for the year.
Enroll by mail using the Automatic Withdrawals - Inherited IRAs (PDF).
Penalty for missing MRDs
If you don't take the required minimum distributions from your account, you will be subject to a penalty equal to 50% of the amount that should have been withdrawn.
Inheriting a Roth IRA
If you inherit a Roth IRA and transfer the assets to an Inherited Roth IRA, unlike the original owner, you must take MRDs. As long as the assets have been in the Roth IRA for five or more years, these MRDs can be withdrawn federally tax-free.
The five-year rule
If the original account owner died prior to age 70½, you may choose to elect to use the five-year rule. Generally, this rule applies if the original owner died before April 1 of the year following the year the original owner would have turned age 70½. If you take advantage of this rule, you do not have to begin taking MRDs in the year following the year of the original owner’s death.
Under the five-year rule:
- You can withdraw from your inherited IRA assets at any time, in any amount.
- You must withdraw all assets by December 31 of the fifth anniversary year following the IRA owner's death.
As long as the account is depleted within this timeframe, the MRD penalties can generally be avoided.
Year of death: 2011
Fifth year after the year of death: 2016
Deadline for depleting the account: December 31, 2016
However, under the five-year rule, assets you withdraw will be included in your ordinary income and are taxable as such. This may impact your taxes significantly. Talk to a tax advisor if you plan to use this option.
Please note that the information provided by Fidelity Investments is general in nature and should not be considered investment, legal or tax advice. Fidelity does not provide investment, legal, or tax advice. Consult with a legal or tax professional regarding your unique tax situations.