Five-Year Rule
Under the five-year rule, you must withdraw the full balance of the inherited IRA by December 31 of the fifth year following the year of the original owner's death. This option is only available if the original owner died before the required beginning date for MRDs-in most cases this is before April 1 of the year following the year the owner turns age 70½. As an example of the five-year rule, if the original owner dies in June 2012 at age 60, the full balance of the IRA must be distributed by 12/31/2017, December 31 of the fifth anniversary following the IRA owner's death. Any remaining balance after the five-year period may be subject to a 50% penalty by the IRS.
Fixed Amount
Select this option to have a specific amount distributed to you on a schedule of your choosing. By using this withdrawal plan you assume all responsibility for meeting IRS MRD rules for the inherited account. For example, you could choose to withdraw $2,000 each month until the account is depleted.
Minimum Required Distributions (MRDs) for Inheritors
The IRS requires owners of inherited IRAs to begin taking minimum required distributions (MRD) annually. The beneficiary of the original owner, who has now inherited an IRA, is required under these rules to begin taking the MRDs by December 31 of the year after the year of death. Exceptions for this beginning date apply only to spouses of the original owner, who may delay beginning to take MRDs until the year in which the original owner would have turned 70½. Any amount that is not taken may be subject to an IRS penalty of 50%. If you haven't taken these by the deadline, you need to check with your tax advisor.
How MRDs are calculated
The MRD calculation is based on information such as date of birth and account balance; whose date of birth depends on the specific situation. For more information, please visit fidelity.com.
Original Owner
The original account owner is the individual who first opened the IRA to save for retirement. This may or may not be the person from whom you inherited the IRA. For example, if you inherited the account from your Aunt Mary and she inherited it from her husband Bob, Bob is the original account owner.
You can usually find the original account owner identified on an account statement or by calling the brokerage firm where the IRA is currently held.
Spouse
A spouse is as defined under federal law.
Successor Beneficiary
If the original beneficiary of the original owner dies before the account has been fully distributed, the new inheriting beneficiary is known as a successor beneficiary or a second-generation beneficiary.
