Navigating the Secure 2.0 Beneficiary IRA 10-Year Spend Down

Key things you really need to know.

Beneficiary IRA distributions have changed dramatically since Secure Act 2.0. In the past you could inherit an IRA from someone other than your spouse and remain taking small distributions at the decedent’s RMD pace. Now the IRS requires you to take the full balance within 10 years. For someone inheriting your elders accumulated retirement savings this could be a substantial tax implication in those distribution years. How do we extend the tax deferred stream into your retirement plan?

First: Understanding the benefits of pre-taxed retirement plans

The idea of a well-designed retirement plan is to capitalize on the tax deduction in the year you contribute, allow the assets to grow tax deferred and then distribute and pay taxes at an assumed lower tax rate in retirement.

Although if we inherit these dollars in some of our highest earning years (50s -60s) you may be paying a higher tax rate on the distribution than the original retiree. So what strategies can we use to continue deferring these inherited assets for your own retirement?

Maximize your retirement savings vehicles like your traditional IRA, employer sponsored plan and even health savings accounts then utilize the inherited IRA distribution to satisfy your expenses.

As always revisit how this situation might improve your long-term financial plan or schedule an appointment with me to best set up your assets for your legacy.

Call me at 203.791.7249 or email hannah.huntley@raymondjames.com