Cortburg Speaks Retirement

10-Year Rule for Inherited IRAs: What Every Beneficiary Needs to Know

• Miguel Gonzalez, MBA, AIF®, CPFA®, CRC® • Season 2024 • Episode 233

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In this episode, Miguel Gonzalez, Certified Retirement Counselor, breaks down the 10 most important facts about the 10-year rule for inherited IRAs. Learn who this rule affects, the key tax implications, and how to strategically navigate RMDs as a beneficiary.

Cortburg Retirement Advisors is a boutique financial planning firm committed to helping you grow, protect, and preserve your assets from your first job to retirement. We specialize in wealth management, estate and tax planning, group retirement, employee benefits, insurance, and retirement planning to navigate any economic climate.

Miguel Gonzalez, a Retirement Specialist with 20+ years of experience, offers expertise in retirement income planning, investment management, and retirement plan design. With an MBA from Columbia Business School, and professional experience with JP Morgan Chase, Merrill Lynch, and more, Miguel is a trusted advisor for his clients.



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Welcome to Cortburg Speaks Retirement Podcast
with Miguel Gonzalez, MBA, AIF®, CPFA®, CRC®

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Welcome to Cortburg Speaks Retirement

An audio podcast about investing in the stock market, financial planning, money management and retirement planning.  Each Wednesday, we help investors at all stages of life learn how to potentially grow and preserve their money from first job through retirement.

Now here is your host, Miguel Gonzalez.

Good morning and welcome to the CORTBURG SPEAKS RETIREMENT audio podcast.   

This week we’re talking about Required Minimum Distributions – specifically, the 10-year rule about inherited IRA’s and RMDs for those accounts.  

Here are the 10 things you need to know about the 10-year rule:

1. The origin of the ten-year rule

The ten-year rule took effect in 2020 with the passing of the Setting Every Community Up for Retirement Enhancement (SECURE) Act. This legislation revamped many rules regarding retirement accounts, including RMDs.

2. Who the rule applies to

The ten-year rule primarily applies to non-spouse beneficiaries of Individual Retirement Accounts (IRAs) and defined contribution plans such as 401(k)s, 403(b)s, and other employer-sponsored retirement plans.

3. The purpose of the rule

The rule mandates that these beneficiaries empty the account by the end of the 10th year following the original account owner's death. This rule ensures that tax-deferred growth benefits don't extend indefinitely and that the government can reclaim some of its deferred tax money.

4. No yearly RMDs

Under the ten-year rule, there's no requirement to withdraw a certain amount each year. As long as the entire account balance liquidates by the end of the tenth year after the account owner's death, the beneficiary is compliant with the rule.

5. Tax implications

Withdrawals from inherited retirement accounts are subject to income tax, so strategically timing withdrawals to manage the tax impact is beneficial. For instance, spreading distributions over the 10 years could keep the beneficiary from moving into a higher tax bracket.

6. Exceptions to the rule

There are notable exceptions to the ten-year rule: surviving spouses, minor children of the account owner, disabled or chronically ill individuals, and beneficiaries less than 10 years younger than the account owner. These beneficiaries can take distributions over their lifetime, providing a potential tax benefit.

7. The rule applies even if the account owner was taking RMDs

The ten-year rule applies regardless of whether the original account owner had started taking RMDs. It eliminates the previous rule that allowed non-spouse beneficiaries to stretch RMDs over their life expectancy.

8. Multiple owners means multiple RMDs

Remember that if you have inherited retirement accounts from multiple owners, each account has a ten-year distribution period that begins on the date of each account owner's death.

9. Ten-year rule and Roth IRAs

One exception to the ten-year rule is Roth IRAs. Even though non-spouse beneficiaries must liquidate inherited Roth IRA accounts within ten years, they don't face the same tax implications because qualified distributions from Roth IRAs are tax-free.

10. The rule is still evolving

The IRS still needs to issue complete guidance on how exactly the ten-year rule may apply. Due to the changing Presidential administration and possible revision of the tax code, consult financial and tax professionals to help navigate this complex area.

In conclusion, understanding the ten-year rule for Required Minimum Distributions can significantly impact one's retirement planning and wealth management approach. As with any financial matter, seeking professional advice tailored to individual circumstances is critical. While the landscape may seem intricate, comprehending this rule can provide clarity, leading to well-informed and beneficial financial decisions.

Make sure to visit our website, www.CortburgRetirement.com. Our site is filled with educational videos, eBooks, publications, and financial calculators designed to help you learn more about your finances.  As you search our site, send us a note regarding any questions you may have about any particular investment concepts or products. We will get back to you quickly with a thoughtful answer.

This is Miguel Gonzalez, Certified Retirement Counselor (CRC) and Managing Partner, with Cortburg Retirement Advisors signing off for this week’s educational podcast.  

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Miguel Gonzalez, MBA, AIF®, CPFA®, PPC®, CRC®

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