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The SECURE Act Starts the Clock on Inherited IRAs

| November 01, 2022
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The "Setting Every Community Up for Retirement Enhancement" Act (SECURE Act) made significant changes to IRAs inherited after January 1, 2020.

For those who inherit IRAs after this date, the SECURE Act requires you to withdraw the inherited funds within ten years or less and eliminates the ability to "stretch" your distributions over your lifetime. This change may have created a complex tax environment depending on the account. It may be wise to speak to your tax professional for more details.1

Exceptions to the Rule

As with most regulations, there are exceptions to the 10-year rule. If you are:

  • a surviving spouse

  • a person with a disability or chronic illness

  • a person no more than ten years younger than the original account owner

One factor to consider: If the original account owner did not take the required minimum distribution the year they died, you must take that distribution for them in that year.2

While the "stretch" rule changed for inherited IRAs, other rules stayed the same. Once the owner reaches age 72, they must begin taking required minimum distributions from a Traditional IRA in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.

The SECURE Act altered the retirement landscape in many ways. If you have any questions or concerns, consider speaking to your financial or tax professional.

1. IRS.gov, April 7, 2022
2. IRS.gov, April 7, 2022

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