RMD rules for inherited accounts are here. You may have less time to act than you thought.


The 10-year period for inherited retirement accounts will not be extended, the Internal Revenue Service said. – Getty Images

Retirement-account beneficiaries wondering if and when they need to take money from their inherited accounts are no longer living in limbo.

Years after the Secure Act of 2019 first told beneficiaries they had to withdraw money from inherited accounts within 10 years, the Internal Revenue Service has finally clarified the rules, including how often distributions must be made and by whom. These rules do not apply to “eligible designated beneficiaries,” including spouses, minor children and disabled or chronically ill individuals.

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The greatest differentiator for who must take annual payments and who doesn’t have to comes down to required minimum distributions, which are federally calculated minimum annual withdrawals an investor must take from most retirement accounts, outside of Roth accounts.

Under the newly issued rules, individuals who inherited an account where the original owner took required minimum distributions, or RMDs, must make annual withdrawals over the span of 10 years. For those who inherited an account from someone who was not yet required to take distributions, beneficiaries have up until the end of the 10th year to take withdrawals as they wish.

The final regulation is effective as of Sept. 17, 2024, but for purposes of determining RMDs, it is applicable beginning on Jan. 1, 2025. The 10-year window will not be extended for beneficiaries, who will have to abide by the 10-year period beginning at the time of inheritance. Beneficiaries will not have to take RMDs retroactively, however.

Jeff Levine, chief planning officer of Buckingham Wealth Partners, shared a thorough chart on the inherited retirement-account rules that apply to beneficiaries via the social-media platform X.

Levine breaks out further specificities about the final regulation in his thread on X.

The rules are still complicated for a few reasons. The age at which someone must take required minimum distributions has changed twice since the first Secure Act was signed into law in 2019 and the Secure 2.0 Act that followed in 2022 — from 70.5 years old to 72 and now 73 (it will be 75 in 2033). Whether the account was split between Roth and traditional investments will also affect how distributions must be treated.

The IRS has allowed beneficiaries to delay RMDs from inherited IRAs for the last few years without facing any penalties. Typically, the penalty for failing to withdraw the required minimum distribution is 25% of what should have been withdrawn. (For example, if the RMD was $1,000 in 2024, the penalty would be $250.)

RMDs may not be required this year, but some beneficiaries might still want to take a distribution before next year. Some investors may see the extended delay as more time to let their account balances grow — but at the same time, doing so will result in higher RMDs, and potentially higher taxes, in the future. It is important for beneficiaries to speak with a qualified professional at the firm housing their inherited assets.

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