Let’s assume, for example, a 73-year-old has an IRA with a balance of $250,000. According to the Internal Revenue Service’s 2017 lifespan table, the person’s life expectancy is 14.8 years, so the RMD is:
$250,000 ÷ 14.8 = $16,891.89
At that rate, it may take several years to deplete the account — in some cases, longer than the account owner is likely to be alive. So what are your options?
First, you can name your spouse as beneficiary of the traditional IRA, and he or she can roll the balance into a new account. If your spouse is over age 70½ when you die, he or she must begin taking RMDs based on his or her life expectancy. When your spouse dies, the second-generation beneficiary may transfer the balance into an inherited IRA. Then, the owner of the inherited IRA must begin taking RMDs based on his or her life expectancy. (See illustration.)
This gives the money in the inherited IRA a longer time to remain tax deferred. Keep in mind, however, that there is no guarantee that the person who inherited the IRA will continue the tax-deferred treatment of the account.