21 May How do I have to take money from this inherited IRA?

Q. My father died in 2006. I turned 72 in 2018. The new law says you must take out all the money from an inherited IRA within 10 years of the death. So where does that leave me?
— Beneficiary

A. We’re sorry to hear about your father.

You are correct that new laws were put into place that can affect the required distributions from inherited IRA accounts.

The SECURE Act (Setting Every Community Up for Retirement Enhancement) which was enacted at the end of 2019, changed the time period over which distributions can be taken for non-spouse beneficiaries, said Claudia Mott, a certified financial planner with Epona Financial Solutions in Basking Ridge.

The act eliminated what was known as the “stretch IRA” by creating a 10-year distribution time period and no longer allowing distributions to be taken over the life of the beneficiary, she said.

But there’s good news.

The rule change only applies if the original account owner died on or after Jan. 1, 2020, she said. As your father died in 2006, you have likely been taking required distributions based on your life expectancy and can continue to do so.

We should note that if you haven’t been taking distributions every year, you’re going to be in for some hefty penalties. You mentioned turning 72, so we’re a little concerned that you thought you could wait on distributions for the inherited account, but as a non-spouse beneficiary, you need to take those annually no matter your age.

Perhaps the confusion stems from the SECURE Act, which also changed the age at which required minimum distributions must be taken from retirement accounts from 70 ½ to age 72, Mott said.

“Specifically, for those whose 70th birthday is July 1, 2019 or later, you do not have to take withdrawals until the April following the year you reach age 72,” Mott said. “This only applies to an individual’s own IRA, 401(k), 403(b) or other qualified plan, not those that are inherited.”

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This story was originally published on May 21, 2021.

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