Page 1: SECURE 2.0 and Inherited IRAs – What You Need to Know
SECURE 2.0 and inherited IRAs bring major changes to how families handle retirement accounts. These changes started in 2022 and become fully active in 2025. If you receive an inherited IRA, this law could affect your taxes and how fast you must take out the money.
What is SECURE 2.0?
SECURE 2.0 is a new retirement law. It updates the rules about saving and using money in IRAs. An IRA (Individual Retirement Account) helps people save for the future. When someone dies, their IRA often goes to a loved one. This is called an inherited IRA.
In the past, people could take money out slowly over their whole life. That option was called a “stretch IRA.” But under SECURE 2.0, most people must follow a different rule.
What is the 10-Year Rule?
The 10-year rule means you must empty the inherited IRA within 10 years. You can take the money out slowly or all at once, but by year 10, the account must be empty. This rule makes SECURE 2.0 and inherited IRAs more complicated, especially when it comes to taxes.
Page 2: How the 10-Year Rule Affects You
SECURE 2.0 and inherited IRAs follow the 10-year rule. Here’s how it works: If your parent dies in 2025 and leaves you their IRA, you must withdraw all the money by the end of 2035.
Why Taxes Matter
Every time you take money out of an inherited IRA, it counts as income. That means you could owe taxes. If you wait and take all the money at once in year 10, your tax bill could be very high. Taking smaller amounts each year might reduce your taxes.
Are There Exceptions?
Yes! Some people do not need to follow the 10-year rule under SECURE 2.0. These exceptions include:
- A spouse who inherits the IRA
- Children under 18 (until they become adults)
- People with a disability
- People with a chronic illness
- Someone less than 10 years younger than the original account owner
Even if you are an exception now, the 10-year rule may still apply later. That’s why it’s important to understand SECURE 2.0 and inherited IRAs in full.
Page 3: Smart Planning for Inherited IRAs
Why You Need a Plan
SECURE 2.0 and inherited IRAs are complex. The 10-year rule can cause tax surprises if you don’t plan ahead. Luckily, there are ways to make smarter choices.
Tips for Managing an Inherited IRA
- Start Early: Spread your withdrawals over the 10 years to reduce taxes.
- Use a Tax Advisor: They can help you follow the rules and avoid problems.
- Check If You Qualify for Exceptions: Being a spouse or under 18 might change the rules for you.
- Understand RMDs: Some people still need to take Required Minimum Distributions each year.
SECURE 2.0 and inherited IRAs affect millions of Americans. By learning the rules, you can protect your money and avoid costly mistakes. Use the 10-year rule wisely, and don’t wait until the last minute.
In 2025 and beyond, understanding SECURE 2.0 and inherited IRAs will help you plan for the future with confidence.
