- Unless you meet an exception, inherited retirement accounts generally must be depleted within 10 years if the person died after 2019.
- The 2019 Secure Act eliminated the ability of many beneficiaries to stretch out distributions across their own lifetime.
- Spouses have more than one option for these inherited accounts.
If you inherit a retirement account, you may want to pause before making any decisions on when and how to access the money.
Basically, the rules that apply depend on your relationship to the person who died. Mistakes can be made, and depending on the specifics, they can be hard to undo.
The 2019 Secure Act eliminated the ability of many beneficiaries to take distributions across their own lifetime from inherited 401(k) or individual retirement accounts if the original account owner died after Dec. 31, 2019.
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Unless you meet an exception — you're the spouse or minor child of the decedent, for example — those inherited accounts generally must now be depleted within 10 years.
Here's what to know.
If the beneficiary is the minor child of the deceased person, the 10-year depletion rule kicks in once they reach the age of majority where they live. In most states, that's age 18.
Before reaching that point, though, the child would have to take annual required minimum distributions, or RMDs as they're known, based on their own life expectancy. (Those required withdrawals generally kick in for retirement savers at age 72 based on the account owner's expected lifespan.)
"So if you have a 10-year-old who takes RMDs, they'd do that until age 18 when they'd flip to the 10-year rule," said Brian Ellenbecker, a certified financial planner with Shakespeare Wealth Management in Pewaukee, Wisconsin.