Inherited IRAs Now Require Annual RMDs
What You Need to Know
If you’ve inherited an IRA in recent years, an important regulatory update may affect your withdrawal strategy. Due to recent IRS guidance stemming from the SECURE Act of 2019, many non-spouse beneficiaries are now required to take annual Required Minimum Distributions (RMDs)—even if the inherited account must be fully distributed within 10 years.
Understanding the Rule Change
Prior to the SECURE Act, non-spouse beneficiaries could "stretch" distributions over their own lifetimes, potentially reducing annual tax liability. However, the new law generally requires that inherited IRA accounts be depleted within 10 years of the original account holder’s death.
Initially, the IRS was unclear on whether RMDs were required annually during this 10-year period. Recent guidance, however, confirms that if the original account holder had already begun taking RMDs, most non-spouse beneficiaries are now required to continue taking annual RMDs starting the year after the account owner’s death.
Key Takeaways
Annual RMDs are now mandatory for most non-spouse beneficiaries if the original account owner had begun RMDs.
Failure to take an RMD may result in a 50% penalty on the amount that should have been withdrawn.
Spousal beneficiaries and certain eligible designated beneficiaries (such as minor children, chronically ill, or disabled individuals) may still be allowed more flexible withdrawal options.
The full balance must generally be distributed within 10 years of the original owner's death, regardless of annual RMDs.
What Should You Do?
If you've recently inherited a traditional IRA or 401(k), it's essential to understand your obligations under the updated rules. These changes can have significant tax implications, especially when not managed properly. At Independent Wealth Solutions, we specialize in helping clients navigate the complexities of inheritance, retirement, and tax planning. Whether you’ve inherited an IRA or are planning your own legacy, our team is here to help you make smart, informed decisions that protect and preserve your wealth.
📞 Ready to review your inherited IRA strategy?
Contact us today to schedule a consultation and ensure your retirement and legacy plans are aligned with the latest regulations.
