- ORIGINAL NEWS
Here’s what to know before withdrawing funds from inherited individual retirement accounts
- SUMMARY
If you inherited an Individual Retirement Account (IRA) after 2020, the rules for withdrawing the money have changed.
**10-Year Withdrawal Window:** Previously, non-eligible heirs had an unlimited time to withdraw funds.
However, the “Secure Act of 2019” established a 10-year period to deplete inherited IRAs.
Non-eligible heirs include individuals who are not spouses, minor children, or have certain disabilities.
**No Penalty for Missed 2024 Distributions:** While the 10-year rule is in effect, the Internal Revenue Service (IRS) waived penalties for missed Required Minimum Distributions (RMDs) in 2024 due to confusion surrounding the new rules.
**Tax Consequences:** Withdrawing large sums within a short period could result in higher taxes.
This is especially important if you have other sources of income, such as selling a business or home.
**Other Factors to Consider:** Before withdrawing from an inherited IRA, it’s crucial to consider: * **Expected retirement date:** You will eventually need to take RMDs from your own retirement accounts.
* **Tax law changes:** Federal income tax brackets are temporarily lower until 2025, which may impact tax liability.
* **Other financial goals:** Assess if there are other financial priorities that may influence your withdrawal decisions.
It’s important to consult with financial professionals to determine the best withdrawal strategy for your specific circumstances.
They can help you navigate the complexities of the new rules and minimize tax consequences.
- NEWS SENTIMENT CHECK
- Overall sentiment:
neutral
Positive
“But the agency has since waived penalties for heirs’ missed RMDs amid confusion.”
“However, “most beneficiaries don’t even care about the 10-year rule. They just want the money,” said individual retirement account expert and certified public accountant Ed Slott.”
Negative
“If you’ve inherited an individual retirement account since 2020, you could have a shorter timeline to withdraw the money, which can trigger tax consequences”
“Under the Secure Act of 2019, certain heirs have a 10-year window to deplete an inherited IRA, but there’s no penalty for missed 2024 distributions.”