Insights

Required Minimum Distributions for IRAs

Investors who have done the hard work of accumulating assets for retirement in an IRA eventually have to think about withdrawing those funds. In particular, IRA investors need to know how to comply with the IRS rules for Required Minimum Distributions (RMDs), which take effect upon reaching age 72 or 73 depending on the year an investor was born.

Use our calculator to help estimate your RMD

Calculating RMDs can be complicated, incorporating a range of factors including the investor's age, life expectancy, and the value of assets in the IRA. To help, Pacific Premier Trust offers a handy and intuitive RMD calculator. Just enter your date of birth, whether you've named more than one beneficiary, and the prior year-end balance in your account, and the calculator will estimate the amount you might need to withdraw to avoid IRS penalties.

Passing an IRA on to beneficiaries

Even investors who make regular, consistent RMD withdrawals often don't use up their IRA assets during their own lifetimes. In this case, if the IRA owner has designated beneficiaries for their IRA assets, those beneficiaries will have RMD responsibilities once the owner dies. This can raise additional tax and estate planning issues.

The good news is that transferring an IRA is relatively quick and simple, as long as the investor has named his or her beneficiaries in the IRA documents. IRA assets pass to named beneficiaries immediately and outside the probate process.

Once beneficiaries receive inherited IRA assets, they have two options. They can withdraw all assets immediately and pay ordinary income taxes on the amount they liquidate, or they can keep the assets in the IRA and stretch out withdrawals over a longer period. This can reduce the immediate tax impact and allow assets held in the IRA to continue to grow tax-deferred.

The ideal strategy for withdrawing money from an inherited IRA will depend on a number of factors, including the ages of both the original owner and the heir, their relationship (spouse or not), and whether the owner had already started taking RMDs.

These issues got even more complicated with the passage of the SECURE 2.0 Act in 2022. Under the new rules, if the inheritor is not a spouse, he or she must withdraw all funds from the account within 10 years. Prior to SECURE 2.0, even non-spousal beneficiaries could stretch out withdrawals for their entire lifespans.¹

The rules surrounding RMDs for inherited IRAs are complex, and not all companies have the expertise to handle them. Pacific Premier Trust leverages its expertise to streamline these calculations through our Inherited IRA RMD Calculator. We were the first self-directed IRA custodian to offer such a tool through our website, and our online calculator still sets the standard for accuracy and ease of use.

Beneficiaries can use our calculator to determine when RMDs should start and how much must be withdrawn. However, for very complex situations, people with inherited IRAs may still wish to consult a tax or planning expert.

As with all planning issues, it's important to start early. Once you've determined your RMD, give your custodian plenty of time to process your request. Even though the deadline is technically December 31st, the sooner you submit your request, the better.

At Pacific Premier Trust, we're here to make Required Minimum Distributions (RMDs) as straightforward as possible. We can calculate the RMD for your Traditional, SEP, or SIMPLE account held with us and provide the amount annually upon your request. Additionally, we include your annual RMD information in your quarterly statements for easy reference.

Please note that, while we're here to assist with accounts you hold at Pacific Premier Trust, only you can calculate your total RMD if you have accounts with multiple institutions. For Inherited IRAs, we recommend using an Inherited IRA RMD Calculator or consulting with a tax advisor, as we do not provide RMD calculations for these accounts.

About Pacific Premier Trust
Pacific Premier Trust, a division of Pacific Premier Bank, is a pioneer in helping investors’ utilization of retirement account funds for real estate, private equity, and other non-exchange traded assets. As the trusted directed-custodian of over $18 billion in assets across 35,000 client accounts, Pacific Premier Trust works with financial institutions, capital raisers, financial advisors, and self-directed investors who elect to leverage tax-advantaged retirement funds in alternative investments. We deliver flexible custodial solutions ensuring a seamless client experience and unparalleled access to private markets, supported by the strength of Pacific Premier Bank. Contact us to learn more.

Important information

Pacific Premier Trust performs the duties of an independent custodian of assets for self-directed individual and business retirement accounts and does not provide investment advice, sell investments or offer any tax or legal advice. Any communication made by Pacific Premier Trust with regard to opening or using a self-directed individual and business retirement account shall not be construed as a recommendation, call to action, or investment strategy to establish a particular account type. Clients or potential clients are in no way obligated to purchase services from Pacific Premier Trust and are free to purchase such services from any custodian they deem appropriate. Clients or potential clients are advised to perform their own due diligence in choosing any investment opportunity as well as consulting with a legal, tax and/or financial professional to assist them with an investment opportunity. Any information communicated by Pacific Premier Trust is for informational and educational purposes only. Alternative investments are not FDIC insured and are subject to risk, including loss of principal. Pacific Premier Trust is not affiliated with any financial professional, investment sponsor, or investment, tax or legal advisor.

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