I inherited a $20K IRA. When do I have to take distributions?

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Q. I inherited a small IRA, less than $20,000, from my mother in 2013. My mom was 79 when she died and I was 50. Over the past nine years, I have been receiving a small distribution from the IRA. The bank set it up and did the calculations. Will I be required to take the remaining balance in full next year which is the tenth anniversary of her death under the SECURE Act or am I grandfathered out?
— Unsure

A. It’s a great question.

The SECURE Act made big changes to distributions from retirement accounts that are inherited by heirs.

Many provisions were introduced to try to make retirement savings easier, but one negative provision was to the rules regarding required distributions from an inherited retirement account, said Joseph Sarnecki, a certified financial planner with U.S. Financial Services in Fairfield.

“The SECURE Act requires most non-spousal beneficiaries who inherited assets on or after Jan 1, 2020, to withdraw the full balance of the account within a 10-year period,” Sarnecki said.

This includes adult children, grandchildren and more, but there were exceptions, which include a minor child of original owner, someone less than 10 years younger than original owner and someone disabled or chronically ill, Sarnecki said

“Previously, as you have been doing, an individual who inherited IRA assets could take distributions over their life expectancy, or `stretch’ the distributions,” Sarnecki said. “As you inherited this account prior to Jan. 1, 2020, you are grandfathered into the stretch provision and are not required to take out the reminder of the account this year.”

It’s all a matter of when you received the inherited account.

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This story was originally published on Dec. 8, 2022.

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