You just lost a loved one. Now, alongside the grief, you’re staring at a 1099-R or a confusing "Beneficiary IRA" account balance in your Fidelity dashboard. It’s overwhelming. Most people just want to know how much they have to take out so the IRS doesn't come knocking with those nasty 25% excise tax penalties. That’s where the inherited RMD calculator Fidelity offers comes into play. But here is the thing: if you just plug in numbers and walk away, you might be making a massive tax mistake.
The rules changed. Big time.
Between the SECURE Act of 2019 and the follow-up SECURE 2.0, the "stretch IRA" is basically dead for most of us. You used to be able to pull money out slowly over your entire life. Now? You probably have a ticking ten-year clock. If you aren't careful, that calculator is just a tool, not a strategy. You need to understand the "why" behind the numbers it spits out.
The IRS Mess and Why Your Calculator Results Might Look Weird
The IRS has been, frankly, a bit of a disaster lately with these rules. For a couple of years, nobody—including the big firms like Fidelity or Vanguard—was 100% sure if beneficiaries of owners who had already started their RMDs needed to take annual distributions during that 10-year window.
Eventually, the IRS dropped the hammer.
If the person you inherited the money from was already of RMD age, you generally have to take annual distributions and empty the account by year ten. If they hadn't hit that age yet, you might just have the "10-year rule" with no annual requirement. This is exactly where a tool like the inherited RMD calculator Fidelity provides becomes essential, because it filters through your specific relationship to the deceased.
Are you a "Designated Beneficiary"? An "Eligible Designated Beneficiary"? Or just a random person named in a will? The tax code treats a spouse very differently than it treats a 45-year-old nephew.
Breaking Down the "Eligible" vs. "Non-Eligible" Label
If you’re a spouse, you’ve got it easiest. You can basically treat the IRA as your own. You don't even necessarily need a calculator yet because your RMDs won't start until you hit your own RMD age (which is now 73 or 75, depending on when you were born).
But most of us aren't spouses. We’re kids, grandkids, or friends.
Most non-spouse heirs fall into the "Designated Beneficiary" bucket. For you, the inherited RMD calculator Fidelity uses will likely point you toward the 10-year rule. You have until December 31 of the tenth year following the year of the original owner's death to zero out the account.
Wait. There is a catch.
If the original owner was already 74 and taking RMDs, you can't just wait until year ten to take it all. You have to take "at least" a certain amount every single year based on your own life expectancy, and then empty it by year ten. If you miss a year, the IRS takes a massive cut. It used to be a 50% penalty. Now it’s 25%, or 10% if you fix it quickly. Still, that's a lot of money to set on fire because of a math error.
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Why You Shouldn't Just Take the Minimum
Calculators are programmed to give you the minimum required distribution. That's what they do. But the minimum isn't always the smartest move for your actual life.
Imagine you inherit $500,000. You’re 55 years old and at the peak of your career earnings. If you use the inherited RMD calculator Fidelity provides and it tells you to take $15,000 this year, you might think, "Great, less taxes now."
But hold on.
If you wait until year ten to take the bulk of that half-million dollars, you might get hit with a tax bill that pushes you into the highest 37% bracket. You’d be giving the government a huge chunk of your inheritance. Sometimes it makes sense to "levelize" the distributions. Maybe you take $50,000 every year for ten years. It keeps your tax bracket steady. A calculator won't tell you to do that; it only tells you what you must do, not what you should do.
How the Fidelity Tool Actually Works
Fidelity’s tool is pretty robust compared to some of the "bare bones" ones you find on random financial blogs. It asks for:
- The date of death of the original owner (This is the "anchor" for all rules).
- The original owner's date of birth (To see if they were already in RMD territory).
- Your date of birth.
- The account value on December 31 of the previous year.
It then references the IRS "Single Life Expectancy Table" (Table V).
The math looks roughly like this:
$$\text{Current RMD} = \frac{\text{Account Balance as of Dec 31 Last Year}}{\text{Distribution Period Factor}}$$
That "Factor" comes from your age. Every year you get older, the factor gets smaller, meaning the percentage you have to take out gets larger. It's a sliding scale designed to eventually empty the account.
The "Successor Beneficiary" Trap
Here’s something the standard inherited RMD calculator Fidelity users see might not immediately clarify: what happens if you inherit an IRA from someone who already inherited it?
This is called a Successor Beneficiary. If your mom inherited an IRA from your dad and was taking distributions, and then she passed away, you don't get a fresh 10-year clock. You are likely bound by her remaining timeline. This is where people get tripped up and end up in "non-compliance" territory. If you find yourself in this spot, don't just trust a web form. Talk to a fixed-fee financial advisor or a tax pro who specializes in estate transitions.
Real World Example: The 10-Year Sprint
Let’s look at a hypothetical. Sarah inherits a $200,000 IRA from her father in 2024. Her father was 80 and already taking RMDs.
Sarah goes to use the inherited RMD calculator Fidelity offers. The tool tells her she has an RMD of about $9,200 for 2025 (based on her age and the life expectancy tables).
Sarah has two choices:
- Take the $9,200 and keep $190k+ invested.
- Take $20,000 to help pay off her high-interest credit cards.
The calculator only shows the $9,200. But if Sarah takes only the minimum, she has to realize that in 2034 (ten years later), she must take everything that's left. If that $200,000 grows to $300,000 over that decade, she’ll have a $300,000 taxable income event in one single year. That could easily cost her $100,000 in taxes.
Strategically, she might be better off ignoring the calculator’s "minimum" and taking out $30,000 a year to keep her tax bill predictable.
Trusting the Tech but Verifying the Data
Fidelity is a massive institution. Their systems are generally top-tier. But garbage in, garbage out. If the date of death is off by one day, or if the account type was misclassified during the "step-up" process, the calculator will give you the wrong answer.
Check your "Fair Market Value" (FMV) statements. The RMD for 2026 is always based on the balance on December 31, 2025. If you had a massive market swing on January 1st, it doesn't matter. The IRS only cares about that New Year's Eve snapshot.
Actionable Steps for Beneficiaries
First, get your paperwork in order. You cannot calculate anything without the "Date of Death" FMV and the previous year-end balance.
Next, identify your beneficiary status. If you are a spouse, you have the option to do a "Spousal Rollover." Do it. It turns the inherited IRA into your own IRA, and you can stop worrying about these complex inherited rules altogether.
If you aren't a spouse, determine if you are an "Eligible Designated Beneficiary." This includes:
- Minor children of the account owner (only until they hit the age of majority).
- Disabled or chronically ill individuals.
- Individuals not more than 10 years younger than the deceased.
If you fit one of those, you might still be able to "stretch" the IRA over your life. If you don't? You're on the 10-year clock.
Once you have your status, run the numbers through the inherited RMD calculator Fidelity provides, but don't stop there. Look at your projected income for the next ten years. Are you retiring in three years? If so, maybe take the minimum RMD now while your salary is high, and then take much larger chunks once you retire and your tax bracket drops.
Finally, automate it if you can. Fidelity allows you to set up automatic RMD withdrawals. This is a lifesaver. You can set it to distribute the minimum required amount on a specific date every year. This ensures you never pay that 25% penalty. Just remember to revisit the plan if your tax situation changes.
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The goal isn't just to satisfy the IRS. The goal is to keep as much of that inheritance as possible. Using a calculator is the start of the conversation, not the end of it. Be proactive about the taxes, because the IRS certainly will be.