In December 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed. It was designed to help save for retirement and make it accessible to more people. With this bill, the rules changed on Inherited IRAs.

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Before the Secure Act, you could stretch your inherited IRAs, 401k’s, 403b’s, etc., over your life expectancy. Now, depending on who you are as a beneficiary, dictates how you must take the assets.

The rule is broken down by the following 3 types of beneficiaries:
Eligible Designated Beneficiaries: If you fall into this category, you may still stretch your inherited IRAs over your lifetime.

Designated Beneficiaries: Designated beneficiaries must follow the 10-year rule. This group includes nearly everybody that wasn’t an eligible designated beneficiary. There are no limitations to how the funds must come out if the account is liquidated in the 10-year period.

Non-Designated Beneficiaries: These folks must take out the funds over a 5-year period. These beneficiaries include charities, certain trusts, your estate that was named in your will.

Since IRAs distributions are taxed as normal income, make sure to check with your CPA or tax advisor to see which withdrawal option makes most sense to your specific situation.

#InheritedIRARulesAFTERtheSecureAct…(read more)

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The Secure Act, which was passed in December 2019, made significant changes to the rules governing inherited IRA accounts. These changes are important to understand, as they can have a major impact on how you plan for the future of your retirement savings.

First, the Secure Act eliminated the “stretch IRA” option. This option allowed non-spouse beneficiaries to stretch out the distributions from an inherited IRA over their lifetime. Now, most non-spouse beneficiaries must withdraw all assets from the inherited IRA within 10 years of the original account holder’s death. This means that the assets must be withdrawn much more quickly than before.

Second, the Secure Act also raised the age of required minimum distributions (RMDs) to 72. Prior to the Secure Act, the age for RMDs was 70 ½. This means that inherited IRA account holders must begin taking distributions from their accounts at a later age.

Third, the Secure Act also eliminated the “five-year rule” for inherited IRAs. This rule allowed non-spouse beneficiaries to take distributions from an inherited IRA over a five-year period. Now, all inherited IRAs must be distributed within 10 years of the original account holder’s death.

Finally, the Secure Act also made it easier for beneficiaries to rollover inherited IRAs into their own retirement accounts. Prior to the Secure Act, inherited IRAs could only be rolled over into another inherited IRA. Now, non-spouse beneficiaries can roll over inherited IRAs into their own retirement accounts, such as a traditional IRA or Roth IRA.

These changes to the rules governing inherited IRAs are important to understand, as they can have a major impact on how you plan for the future of your retirement savings. If you have questions about these changes or would like to discuss how they may affect you, it’s important to speak to a qualified financial professional.