IRA Distributions Update

July 27, 2023


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IRA Distributions Update

I know I’ve written and talked about this subject before, but there’s still a lot of bad information and bad advice I hear about IRAs, inherited IRAs, and the required minimum distributions or RMD‘s. Why is this? Well, perhaps one of the reasons is that the rules seem to be constantly changing and are complex. For example, rules on inherited IRA distributions are some of the most complicated in the IRS tax code.

Let me share a timeline with you:

December 2019 – The SECURE Act eliminated stretch IRAs for most non-spousal beneficiaries. Now non spousal beneficiaries must liquidate the account within 10 years, not over their lifetimes. Of course, this depends on when the owner died.

January 2022 – The IRS updated the life expectancy tables for IRAs, inherited IRAs, for required distributions.

February 2022 – The IRS issues regulations to the SECURE Act, requiring distributions for certain beneficiaries, who were subject to the 10-year liquidation rule. Now those certain beneficiaries must also take annual distributions as well as liquidate in the 10 year period. I know I warned you about this one, but a lot of people who were not our clients missed it.

October 2022 – the IRS says if you missed the annual RMD in 2021 that I just talked about they’ll waive the penalty. OK think about that. I was supposed to take the money out in 2021 but the IRS finalize the regulation in 2022??? So, the IRS actually did the right thing by waving the penalty in 2021.

December 2022- The SECURE Act 2.0 was passed with a boatload of changes. A couple of those changes are:

  • Delaying the beginning date for RMD’s.
  • Reducing the penalty for missed RMD’s, including a three-year statute of limitations for missed RMD penalties. Remember the previous penalty for missing your RMD was 50% of what you should’ve taken out. That’s now down to 10%.

Still confused? Please call us. Remember many of these changes are now a permanent part of the tax code and violating them can’t be undone.

And please keep listening to the New England Capital's video blogs and we’ll keep you informed with good and timely information like this from our team of Chris Lee, Ann Ocone and others on the New England Capital team.


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