IRS Ends 10-Year Rule for Retirement Withdrawals, Making Things “Even More Insanely Complicated”

The IRS and Treasury Department have released final regulations updating the required minimum distribution (RMD) rules for beneficiaries under the 10-year rule.

These regulations, arising from the SECURE and SECURE 2.0 Acts, confirm that most IRA beneficiaries must receive distributions annually during the 10-year period following the account holder’s death, in accordance with thinkadvisor.

Key points of the final regulations include:

1. Ineligible designated beneficiaries subject to the 10-year rule must take RMDs every year.

2. Beneficiaries of individuals who have begun required annual distributions must continue those distributions even if the account balance is fully distributed within 10 years.

Ben Henry-Moreland, senior financial planning nerd at Kitces.com, notes that while these rules aren’t game-changers for planning, they do make retirement accounts “even more insanely complicated.” For example, beneficiary spouses now have three different options for handling their deceased spouse’s retirement account, each with its own RMD calculation.

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Jeff Levine, Kitces.com’s top financial planning nerd, points out that annual distributions during the 10-year rule are required if death occurred on or after the required start date (RBD). However, due to previous IRS warnings, this rule will not apply until 2025.

The IRS and Treasury have also issued proposed regulations addressing additional RMD issues under the SECURE Act 2.0. They are soliciting public comments on these proposed rules, which cover other changes related to RMDs.

Experts note that while these regulations clarify many issues, they also add complexity to the management of retirement accounts. Advisors will need to stay informed about these complex rules to provide valuable guidance to clients navigating retirement planning and inherited accounts.

The financial planning community is now anticipating further guidance on other provisions of SECURE 2.0, such as transfers of unused 529 plan funds to Roth IRAs.

These new regulations underscore the evolving landscape of retirement planning and the growing importance of expertise in navigating complex tax rules for retirement accounts.

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This article IRS Ends 10-Year Rule for Retirement Withdrawals, Making Things “Even More Insanely Complicated” originally appeared in Benzinga.com