The Secure Act has eliminated the stretch IRA for most people who are inheriting an IRA or 401(k). Now, beneficiaries who inherit an IRA will need to follow the 10-year rule, which can significantly increase the income taxes due on your inheritance, not to mention the new onerous rule of when and how much you must take each year in Required Minimum Distributions.
The New Inherited IRA Required Minimum Distribution Rules
The good news is that stretch IRAs are still available for spousal beneficiaries. However, for most non-spouse beneficiaries (think children, friends), the stretch IRA option has been replaced with a new 10-year payout rule. This rule requires that IRA beneficiaries empty out an inherited IRA balance by the end of the tenth year after death. The new rules apply to IRA beneficiaries who received an inheritance in 2020 or later.
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