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Five-Year Rule

Last Updated May 8, 2009


Under the five year rule, the inherited retirement assets must be fully distributed by the end of the 5th year, following the year the participant dies. For instance, if the participant dies in 2010, the assets must be fully distributed by December 31, 2015.
The five year rule applies only if the participant dies before the  required beginning date.
For non-Roth retirement accounts, beneficiaries usually have the option of choosing between the five year rule and the life expectancy rule, if the retirement account owner dies before the required beginning date.  This applies to Roth IRAs regardless of the age of the Roth IRA owner at death, as there is no RMD for the Roth IRA owner and thus no required beginning date.
Most plan documents default of the life-expectancy rule, with the five year rule applying only if election. Some do default to the five year rule.
Referring Cite
IRC § 401(a)(9)(B)(ii), Treas. Reg. §1.401(a)(9)-3, Q&As 1, 2
Additional Helpful Information
  • When there is a designated beneficiary for the retirement account, the life-expectancy option is the default option under the RMD regulations. However, some plan documents and IRA agreements do not offer the life-expectancy option; instead they may require the beneficiary to distribute the balance soon after the participant’s death or within the five-year period.
  • If the beneficiary is a non-person, such as an estate of a non-qualified trust, the life-expectancy rule is not an option. Instead, the assets must be distributed within the five-year period, or faster if the plan document so requires.