One of the things we are committed to at RichLife Advisors is providing all of our readers with the best and most timely information possible when it comes to managing and planning your retirement finances.
You may have heard there is a lot of confusion about how the IRS is interpreting the 10-year RMD rule for inherited IRAs.
Under the SECURE Act, for deaths occurring after 2019, most non-spouse beneficiaries lost the ability to stretch tax deferral over multiple generations and multiple decades. Instead, inherited accounts must be emptied after 10 years.
Most financial professionals believe that the 10-year rule has no annual required minimum distributions (RMDs) until those 10 years have passed.
That changed in March 2021 when the IRS updated Publication 590-B to help with preparing 2020 tax returns. This is an informal publication that shouldn't be treated as official guidance.
The publication seems to impose RMDs for years 1 through 9, before the account must be completely empited 10 years after death.
However, there are many contradictions within the publication that need to be addressed and clarified. And, that has not yet happened.
As soon as we find out exactly how the IRS is interpreting the 10-year rule you will be the first to know.
In the meantime, don't be in a hurry to pay an RMD this year on an IRA you inherited in 2020. It's in your best interest to wait until later this year after the IRS will (hopefully) have clarified things with official guidance. Once you've taken money out of the account, you can't put it back in.