SECURE Act Changes Inherited IRA Rules: Non-Spouses Face 10-Year Withdrawal Deadline
The SECURE Act has introduced significant changes to inherited Individual Retirement Accounts (IRAs). Non-spouse beneficiaries now face a 10-year deadline to withdraw funds, while spouses retain more flexibility. Previously, non-spouse beneficiaries could stretch distributions from inherited IRAs over their lifetime. However, the SECURE Act, effective from January 1, 2020, requires most non-spouse beneficiaries to fully distribute the account within 10 years of the original owner's death. This applies to both traditional and Roth IRAs, with Roth IRAs offering beneficiaries better tax benefits upon withdrawal. Spouses, however, maintain more options. They can roll over inherited IRAs into their own accounts, deferring required minimum distributions (RMDs) until age 73. Alternatively, they can take a lump-sum distribution, disclaim the proceeds, or transfer funds into an Inherited IRA, with RMD rules varying based on the original owner's death date. The SECURE Act's changes to inherited IRAs impact beneficiaries differently. Non-spouse beneficiaries must now plan for a 10-year withdrawal period, while spouses retain more flexibility. Understanding these changes is crucial for beneficiaries to make informed decisions about their inherited IRAs.
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