Retirement tax questions

@biggap 

The reason Turbotax asks is there are some things you can't do with the RMD itself.  For example, you can't recontribute the required portion of the withdrawal to a different IRA, or roll it over to a different IRA.  Your answer is not reported to the IRS, but is used to make sure that the rest of your tax return is OK.  For example, if you contributed some money to your own IRA, Turbotax will make sure you had enough other income (not counting the RMD) to permit the contribution.

 

The purpose of the RMD is that you can't keep the money in a tax-free account forever.  After you inherit it, you can withdraw it all at once, or within 5 years, and pay the tax then.  If you want to keep it longer than 5 years, you have to withdraw at least a minimum amount each year and pay tax on it**.  The amount you must withdraw each year is determined by your life expectancy and the account balance, and has no relation to any amounts you withdrew in the past.  You must at least withdraw the minimum amount, you can always withdraw more if you want.  

 

(**And, this "stretch" option only applies to IRAs that were inherited in 2019 or earlier.  IRAs inherited in 2020 or after don't have any RMD requirement—you must withdraw all the money within 10 years, but you don't have any requirements along the way.)

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