Beneficiary Distribution Facts

Beneficiary Distributions Considerations

Planning for the future is crucial and understanding your options as a beneficiary can help ensure your financial security. This summary outlines the distribution options available for both spouse and non-spouse beneficiaries. The information below is general and nature and should not be relied on as advice, please reach out to a financial or tax advisor to review your situation as there are exceptions to the regulations below.

Spouse Beneficiary Options

1. Remain in the Decedent’s Plan
   • Take distributions (RMDs) based on spouse’s life expectancy.
2. Rollover to an IRA or another retirement plan
   • Required Minimum Distributions (RMDs) will begin based on the spouse’s age.
3. Lump-Sum Distribution
   • Receive the entire account balance in a single payment subject to taxes.

Non-Spouse Beneficiary Options

1. Rollover to an Inherited IRA:
   • Need to withdraw the funds within the 10-year rule. (see definition below)
   • RMDs must continue following the participant’s death if the account holder died after starting RMDs with the full balance withdrawn by year 10.
2. Lump-Sum Distribution:
   • Receive the entire account balance in a single payment subject to taxes.

Ten-Year Rule (after 2020)

Withdraw the entire account balance by the end of the tenth year following the participant’s death, exclusion to this rule for a minor child of participant (until they reach age of majority), someone who is disabled or chronically ill, or a beneficiary who is not more than 10 years younger than the deceased participant. For those under the exclusion of the rule, they have the option to take distributions over their life expectancy.

Important Considerations

• Tax Implications: Consult a tax advisor to understand the tax consequences of each option.
• Financial Planning: Consider your long-term financial goals when choosing a distribution method.
• Deadlines: Be aware of deadlines for making your distribution choice to avoid penalties.

Disclaimer: This summary is for informational purposes only and does not constitute financial advice as every situation is different. Please consult with a financial or tax advisor to review what makes sense for your situation.

Additional Resource:   Retirement topics – Beneficiary | Internal Revenue Service