10-year inherited IRA distribution rule
Under the SECURE act, non-spouse inherited IRAs are now required to be distributed over a period of no greater than 10-years. Did 2020 “count” as one of those 10 years, since Congress waived RMDs for that year? In other words, if a non-spouse individual inherited an IRA in 2020, do they have until the end of 2030, or the end of 2031?
Permalink Submitted by Alan - IRA critic on Fri, 2024-12-27 12:40
End of 2030. The year of death is not counted, therefore the first year is 2021 and the 10th year is 2030.
Permalink Submitted by Nathan Kastner on Fri, 2024-12-27 13:43
Thanks. I asked that question poorly, and should have used a better example. I’m more specifically wondering if years in which Congress grants an RMD waiver are counted when calculating our 10-year window. So, for example, if someone died in 2024, their non-spouse heirs would ordinarily be required to empty that inherited IRA by 12/31/2034. But what if a recession causes Congress to waive RMDs in 2028? Does the final distribution date remain 2034, or does it effectively become an 11-year distribution cycle, because of the RMD waiver???
Permalink Submitted by Alan - IRA critic on Fri, 2024-12-27 14:12
Most likely, 11 years.
Since 2000, RMD waivers due to recession and bear markets occurred in 2009 and 2020. In both cases both owner and beneficiary RMDs for those years were waived and for beneficiaries subject to the 5 year rule, those years were not counted, effectively extending the 5 years to 6 years. Should this waiver apply again in the future, it is therefore likely that a beneficiary in the midst of a 10 year rule RMD period would then have 11 years, and a 5 year rule (eg an estate) would have 6 years.
Permalink Submitted by rosalyn malin on Mon, 2024-12-30 12:06
I believe that because of confusion about aspects of the Secure act RMDs have been waived for the last three or 4 years. Does that mean that the ten year period for some people may be extended to more than ten years?
Permalink Submitted by Nathan Kastner on Mon, 2024-12-30 13:46
RMD’s were waived for 2023 and 2024, but the most recent guidance stated that no more waivers would be forthcoming. Guidance also made clear that while the annual distribution was waived, those years still counted towards the 10-year and 5-year rules.
Permalink Submitted by Alan - IRA critic on Mon, 2024-12-30 13:52
No, there are no circumstances for which the 10 year rule would have been extended.
Waiver of annual RMDs within the 10 year rule applied for 2021-2024, but those individual year waivers did not extend the 10 year period. For those who did not take annual RMDs in those years, there are fewer years left over which the total RMD can be spread. For beneficiaries of post 2019 deaths that are subject to the 10 year rule, the inherited IRAs must always be drained by the end of the 10th year.