I have a bIRA that starts in 2021 w/ 10 year draw down. Repackaged into a boglehead 4 portfolio basically. I'm trying to grow it while it's dispersing to try and negate the tax loss that it gets hit with before transitioning into a new taxable account.
I'm used to handling this in planners adding it like a flat income for 10y but PRC seems to have some notion of bIRAs. I just can't figure out how to use it right.
Income / Inherited IRA / Amount $$$ / Year 2022 / Distro period 10
When I look in the analysis/projections however it lump sums it in year 2022 as far as I can tell.
Can i get a better breakdown of how a bIRA operates in PRC &/or get a better clue to using it. 🙂
Sorry, 2021 I had the RMD for 2021, the bIRA clock starts in 2022 which is why I set it to 2022.
@ciordia9 I'm not familiar with the term bIRA, but I assume you're referring to an inherited traditional IRA. Assuming you inherited that IRA prior to the start of the PRC modeling period (let's say 2021), then you enter the balance of that IRA account in the inherited traditional IRA field on the Financial Assets > Initial Balances page. Then, in the Inherited Traditional IRA section of the Income page, you enter the distribution period (10 years). You should leave the Amount and Year fields blank since the inheritance has already occurred. The rate of return on this account is assumed to be the same as that on your own tax-deferred accounts. Given this information, PRC will generate RMD's stretching over a 10-year period and you can see the results on the Tabular Projections pages (you may have to use the Tabular Projections > View Mgmt page to specify that the "RMD from Your Inherited IRA" is to be associated with a particular view).
Sorry, you are correct, inherited ira, what I've come to calling a beneficiary ira or bira for my own shorthand. To kick it off I had to get an initial RMD that was for this year (because of how you have to take the rest of the deceased's benefit for the year) but it technically doesn't start until next year. That's why I have it and its subsequent 10 year wind-down occurring in 2022 not 2021. For a modeling test I'll go back and see what happens if I enter it as if it started this year.
Hi, I'm a new Pralaner, getting everything set up (Gold, 2022). So I don't exactly know where I should ask this, but I found this old thread on inherited IRAs.
I too have an inherited IRA that began in 2018. In PRC, I entered its 2021 year end balance (278,185). In the Income/Inherited IRA section, I entered a name and "lifetime" with no $ amounts, per the manual. Starting year = 2022. Well, in the tabular projections the RMD shows as 10,952 for 2022. But the Fidelity and TD Ameritrade tools both calculate my 2022 RMD as 11542.95. Have I done something wrong, or is Pralana miscalculating RMDs for inherited IRAs? Or is there some other toggle in the tool I'm not yet understanding?
-edit- and I understand that future RMD predictions would be guesses based on ROR, but the initial year, given an accurate beginning of year balance, should be exactly correct, shouldn't it?
Hi Bob,
Here's my guess: The way RMD's on inherited IRA's work is that you look up the distribution period from the Single Life Expectancy Table in the first year (2018 in your case) and then subtract 1.0 from that initial distribution period in subsequent years. PRC doesn't do that sort of look-back in calculating the RMD's for IRA's inherited prior to the start of the modeling period. Rather, it uses your current age and looks up the distribution period as if you just inherited the IRA this year. This will result in some small differences, like the one you've described here. In the grand scheme of trying to estimate the future, that $600 annual difference is a pretty small error and that's why the PRC design doesn't currently go to the extra lengths to get this precisely correct; however, in keeping with Pralana's philosophy for doing high-fidelity modeling, I've decided to eliminate this small error in a near-term update of PRC2022.
Stuart
ok that makes sense. Agreed the difference is minor in the scheme of things - my question was more so to make sure I was doing things right on my end. Thanks!
Keep in mind that with these inherited IRAs, you don't have a required yearly RMD, you just have to drain it by the end of the ten years. So, if you preferred to let it sit and not add to your taxable income for a while, and drain it later in that ten year period, when you might be in a lower tax rate, you can do that.
Well now that's interesting. Mine started in 2018, so I can drain it over my lifetime (it's pre- the new 10 year requirement). I thought with that approach I do actually have to take the annual RMD, don't I? Thanks!
re: "however, in keeping with Pralana's philosophy for doing high-fidelity modeling, I've decided to eliminate this small error in a near-term update of PRC2022"
Coincidentally, I also have an inherited IRA and have been head-scratching over why the Pralana RMD is not the expected amount. Googled and found Bob's question and Stuart's answer (and upcoming refinement) from just this past week. I really appreciate appreciate both...thanks!
Hi, I'm brand new to Pralana this past week(Gold, 2022). Not sure where to go, so posting on this related post.
My wife has an inherited IRA that began in 2014. In PRC Financial Assets>Initial Balances>Inherited Accounts>Spouse Inherited IRA(s) column, I have entered the IRA's 2021 year end balance. Then in the Income>Inherited IRA> Spouse column section, I have entered a Description and selected a Distribution Period of "Lifetime" from the dropdown.
I then open the Tabular Projections>Income section expecting the Inherited IRA's and Roth IRA's column to display the 2022 RMD and subsequent year RMDs through the end of the plan but there are no values in this column (only dashes).
I'm sure this is probably a user error in the way I entered the information... I initially had different values in the Income>Inherited IRA columns until I re-read the User Manual's section on Inherited IRA data entry and then modified my entries to those described above. I used the delete key (not space) to remove entries I had previously made to Amount (which was initially the same value as that on the Initial Balances panel, and is now empty) and Year the Inheritance Occurs (I originally put in the year 2014 but then deleted it per the manual since RMDs are already taking place).
Any help in what to try next would be much appreciated. Thanks!
@jimbainb Right. That column on the Income projection only shows the inheritance itself which is zero since it occurred prior to the start of the modeling period. You can go to the Accounts projection to see the current balance and to the Withdrawals page to see the distributions from that account.
Stuart
@smatthews51 Stuart, Thank you for the quick response.
Your explanation of how the Inherited IRA and Roth IRA column in the Income view contains the inherited amount and not the account RMDs (and thus why the column values are all empty due to the inheritance happening prior to the first displayed year), I then again looked for the RMD column/information in the two locations you mentioned - The account projected column was shown in the Accounts view, but the RMD column was not displayed in the Withdrawals view. I then opened the View Management interface and noted that the RMD from Spouse's Inherited IRA was not checked for ANY of my views. I added a check for the column to the Withdrawals view (and also the Income view) and voila - the RMD depreciation amounts are now displayed!
Thanks again!
