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Good news for people with inherited IRAs

Posted by Cheryl Costa December 27, 2008 03:03 PM

As we reported in this blog a few days ago, President Bush signed the "Worker, Retiree and Employer Recovery Act of 2008" on December 23, 2008. The highlight of this legislation was a one year suspension of the requirement to take 2009 required minimum distributions (RMDs) from your IRA. Obviously, many seniors are excited about the option not to take RMDs, but did you know that this legislation also covers the owners of inherited IRAs? Now, owners of inherited IRAs of every age are free to pass on taking their 2009 RMDs as well.

Remember that if you have not yet taken your 2008 RMD, you need to get that distribution paid by the end of this year or you risk incurring a 50% penalty on the amount you should have withdrawn but did not. Many people were waiting to take their 2008 distribution in hopes that 2008 RMDs would be suspended or reduced but that is no longer a possibility.

The one exception to this rule is if you turned 70 1/2 in 2008, you can wait until April 1, 2009 to take your first distribution. However, you are still required to take the 2008 distribution. You can't opt to wait until April 1, 2009 and then skip the 2008 distribution because its payment occurs in 2009.

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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.
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About the contributors

Jill Boynton is co-founder of Cornerstone Financial Planning in Newington, N.H. Along with traditional financial planning services, Boynton provides analysis specifically for divorce.
Andrew Chan is the founder of Integrative Financial Advisors in Framingham. He provides comprehensive financial planning advice and investment management services. He has been an adviser for over 12 years and works with clients to integrate all aspects of their finances including investments, retirement, education funding, and tax planning.
Cheryl Costa is a managing director at AFW Wealth Advisors, which has offices in Natick and Purchase, N.Y. She advises clients on investing, education funding, and estate planning. She holds a master’s in business administration from Boston University.
Jamie Downey has been an accountant for more than 14 years. He's a partner at Downey & Co. in Braintree. Prior to joining the firm, he served as a manager in the audit department of accounting firm KPMG.

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