Roth IRA Required Minimum Distributions (RMDs)

Roths have no RMDs during your lifetime, but your heirs must generally take them

At some point, all individual retirement accounts (IRAs), both Roth and traditional, must have their balances distributed to the account owner or the owner’s beneficiaries. A key difference between the two types of IRAs is that you don’t have to take any distributions from a Roth IRA during your lifetime if you are the original owner.

Key Takeaways

  • You must take required minimum distributions (RMDs) from a traditional individual retirement account (IRA) starting at age 72.
  • Unlike traditional IRAs, there are no RMDs for Roth IRAs during the account owner’s lifetime.
  • A Roth IRA’s beneficiaries generally will need to take RMDs to avoid penalties, although there is an exception for spouses.
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RMD Rules for Roth vs. Traditional IRAs

Required minimum distributions (RMDs) represent the minimum amount of money that you must take out of your retirement account each year after reaching a certain age. That amount is specified by the Internal Revenue Service (IRS) and, in the case of traditional IRAs, the withdrawal will be taxed as income at your current tax rate. The IRS also imposes a 50% penalty on any missed RMDs.

You must begin taking RMDs from a traditional IRA by April 1 of the year after you turn 72 (the old threshold of 70½ still applies if you hit that age by Jan. 1, 2020). You must take them even if you don’t need the money for living expenses. The amount of your RMD is based on your prior year’s account balance (as of Dec. 31) and your age at the time. Many other types of retirement accounts, including 401(k) plans, follow a similar set of rules. You must almost always pay income taxes on those withdrawals.

One of the great advantages of Roth IRAs is that they are not subject to the same RMD rules. If you have a Roth IRA, you don’t have to take RMDs from it during your lifetime. So if you don’t need the money, you can leave the funds untouched and let the account grow tax-free (possibly for decades) for your heirs. Your beneficiaries—other than a surviving spouse—must take RMDs from your account after they inherit it.

What Are the RMDs for Roth Beneficiaries?

When you leave a Roth IRA to your beneficiaries, they—unlike you—generally will have to take RMDs from the account. They also will face a 50% penalty (or excise tax) if they don’t take the distributions as required. So it pays to understand the rules—and make sure your beneficiaries do as well.

The rules differ depending on whether a spouse or a different beneficiary inherits the Roth.

Options for Spouses

  • Do a spousal transfer (treat as your own). You transfer the assets into your own Roth IRA (an existing one or a new one). You’re subject to the same distribution rules as the original account holder. Note that you can do this only if you are the sole beneficiary on the account.
  • Open an inherited IRA: life expectancy method. Here, you transfer the assets into an inherited IRA in your own name. You must take RMDs, stretched over your life expectancy. But you can postpone distributions until Dec. 31 of the year after your spouse passed away. Distributions aren’t taxed if the five-year rule on inherited IRAs has been met. You also could base distributions on the age and life expectancy tables of the deceased—which would be advantageous mainly if your spouse was significantly younger than you were.
  • Open an inherited IRA: 10-year method. You transfer the assets into an inherited IRA in your name. You can spread your distributions over time, but the account must be fully distributed by Dec. 31 of the 10th year after your spouse passed away. Distributions are not taxed if the five-year rule has been met.
  • Take a lump-sum distribution. When you take the lump-sum option, the Roth IRA assets are distributed to you all at once. If the account was less than five years old when your spouse passed away, then the earnings will be taxable.

Options for Other Beneficiaries

A non-spouse who inherits a Roth IRA once had similar options to those above (except for the treat-as-your-own spousal transfer). But the Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed in December 2019, changed all that for account holders who died after Dec. 31, 2019.

Under the new law, beneficiaries are either “eligible designated beneficiaries,” “designated beneficiaries,” or “non-designated beneficiaries.”

An eligible designated beneficiary can be a surviving spouse (who doesn’t elect or qualify for spousal transfer), a minor child, an individual who is disabled or chronically ill, or an individual who is not more than 10 years younger than the original account owner. They are all allowed to take distributions over their remaining life expectancy—except for minors, who can start out using their life expectancy but must switch to the 10-year method once they reach the age of majority (which varies by state). Beneficiaries figure their life expectancy by using the tables and worksheets in IRS Publication 590-B.

Designated beneficiaries must withdraw all the money by the end of 10 years, while non-designated beneficiaries (often an entity such as a trust or charity) must withdraw it by the end of five years.

Do Roth 401(k) plan accounts have required minimum distributions (RMDs)?

Yes, designated Roth 401(k) accounts, as they are called, are subject to required minimum distributions (RMDs) starting at age 72, unless the account owner is still working. However, because they are Roth accounts, you don’t owe taxes on the RMDs. What you lose is that money’s ability to continue to grow tax free within the account.

Do you have to pay taxes on Roth IRA distributions?

No, as long as the account owner has had a Roth account for at least five years (the five-year rule), all distributions are tax-free. Even before that, withdrawals of contributions (but not account earnings) will be tax-free. That’s because they have already been taxed.

How do I name a beneficiary for my Roth IRA?

The financial institution where your Roth IRA is held (the custodian) can supply you with forms to designate your beneficiaries. You may want to name both a primary beneficiary (or beneficiaries) and contingent beneficiaries in case you outlive your primary beneficiaries. You also should review your beneficiary designations periodically and update them as necessary.

The Bottom Line

A Roth IRA can be an excellent wealth transfer vehicle because you don’t have to draw down the account during your lifetime, and distributions are generally tax-free for your heirs.

One challenge with Roth IRAs is that your beneficiaries may not be aware of the RMD rules. So, if you have a Roth IRA, do your beneficiaries a favor: Let them know the basics about distributions—or they’ll get a costly lesson later, when they’re hit with a 50% penalty on the amounts they should have withdrawn. As long as everyone understands the rules, you and your heirs can enjoy years of tax-free growth and tax-free income from your Roth IRA.

Article Sources
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  1. Internal Revenue Service. "Distributions From Individual Retirement Arrangements (IRAs)." Page 36.

  2. Internal Revenue Service. “Retirement Plan and IRA Required Minimum Distributions FAQs.”

  3. Internal Revenue Service. “Retirement Plan and IRA Required Minimum Distributions FAQs.”

  4. Internal Revenue Service. “Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs),” Page 36.

  5. Internal Revenue Service. “Required Minimum Distributions for IRA Beneficiaries.”

  6. Internal Revenue Service. "Distributions From Individual Retirement Arrangements (IRAs)." Page 9.

  7. Internal Revenue Service. "Topic No. 412 Lump-Sum Distributions."

  8. Congress.gov. "H.R.1994 - Setting Every Community Up for Retirement Enhancement Act of 2019." Sec. 401(3)(A)

  9. Internal Revenue Service. “Retirement Topics — Required Minimum Distributions (RMDs).”

  10. Internal Revenue Service. “Roth Comparison Chart.”

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