Understanding The Latest Rules for Inherited IRAs – Sign Up for Our Weekly Retirement Newsletter:
In today’s video, we dive deep into the intricate world of Inherited IRAs. The biggest question most people have when inheriting an IRA is whether or not they are required to take money out of the account each year. Dealing with the loss of a loved one is challenging, and the complexities of inheriting an IRA can add to the stress. With the IRS continuously contemplating changes to the distribution rules, it’s crucial to stay updated.
🔹 What’s Inside:
– The ongoing confusion surrounding the Inherited IRA.
– A recap of the SECURE Act and its impact on IRA distribution rules.
– The difference between Non-Designated Beneficiaries and Designated Beneficiaries.
– How the SECURE Act changed the game for Designated Beneficiaries.
– The IRS’s recent proposed regulations and what they mean for you.
– Strategies for managing your inherited IRA to avoid potential tax pitfalls.

🔹 Resources & Links:
IRS Single Life Expectancy Table –

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– Johnathan Rankin CRPC® CEPA®, Founder & CEO
– Theorem Wealth Management
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Disclaimer: Johnathan Rankin is a Registered Representative of Sanctuary Securities Inc. and an Investment Advisor Representative of Sanctuary Advisors, LLC. Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC. Advisory services offered through Sanctuary Advisors, LLC., an SEC Registered Investment Advisor. Theorem Wealth Management is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC. All discussions regarding investments are for illustrative purposes only. Nothing on this channel should be considered as personalized advice or a solicitation to buy or sell any securities….(read more)

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Understanding The Latest Rules for Inherited IRAs

Individual retirement accounts (IRAs) are a popular tool for saving for retirement, providing individuals with tax advantages and potential growth for their savings. Inherited IRAs, as the name suggests, are IRAs that are passed down to beneficiaries after the original owner’s death. However, it is important to understand the latest rules governing inherited IRAs to maximize their benefits.

In 2019, the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) was passed, which introduced significant changes to the rules for inherited IRAs. These changes mainly affect non-spouse beneficiaries and the distribution timeline for inherited IRAs.

Under the previous rules, non-spouse beneficiaries were allowed to stretch out required minimum distributions (RMDs) from inherited IRAs over their lifetimes. This strategy allowed beneficiaries to minimize the tax liability associated with withdrawing funds from the account. However, the SECURE Act eliminated the stretch IRA provision for most non-spouse beneficiaries.

Under the new rules, non-spouse beneficiaries are required to withdraw the entire balance of an inherited IRA within 10 years of the original owner’s death. However, the law does provide some exceptions to this rule. Eligible designated beneficiaries, such as surviving spouses, minor children, disabled individuals, and chronically ill individuals, are still able to use the stretch IRA strategy and take distributions over their lifetimes based on their life expectancy.

The change in distribution rules for inherited IRAs has significant implications for tax planning strategies. With the compressed 10-year timeframe, beneficiaries may need to carefully consider the timing and amount of withdrawals from the inherited IRA to minimize the tax impact. For instance, beneficiaries may choose to delay withdrawals until the later years of the 10-year period to allow the funds to continue growing tax-deferred. Additionally, beneficiaries can take advantage of other tax planning tools, such as Roth conversions, to further optimize their inheritance.

It is also important to note that the change in distribution rules does not apply to inherited IRAs received before January 1, 2020. Beneficiaries of IRAs inherited prior to this date can still use the stretch IRA strategy and distribute the funds over their lifetimes.

To ensure compliance with the latest rules, it is recommended that beneficiaries of inherited IRAs consult with a financial advisor or tax professional. These professionals can assess the individual’s situation and provide guidance on the most appropriate distribution strategy, taking into account factors such as tax implications, investment goals, and individual circumstances.

In conclusion, understanding the latest rules for inherited IRAs is crucial to maximize the benefits of these accounts. With the changes brought about by the SECURE Act, non-spouse beneficiaries should be aware of the new 10-year distribution requirement. Seeking advice from financial professionals can help beneficiaries navigate these changes and make informed decisions about the timing and amount of withdrawals from their inherited IRAs.