Are stretch IRA grandfathered?

Despite what many beneficiaries are being told, the 10-year rule applies only when the original owner of the IRA passed away after 2019. Beneficiaries who inherited IRAs before 2020 are grandfathered. They get to follow the old rules and continue to benefit from a Stretch IRA.

What is the IRA 10-year rule?

The 10-year rule requires the IRA beneficiaries who are not taking life expectancy payments to withdraw the entire balance of the IRA by December 31 of the year containing the 10th anniversary of the owner’s death.

Are there limits to the use of stretch IRAS?

But with the passage of the Tax Cuts and Jobs Act, the stretch IRA was given a reprieve. However, retirement bills making their way through Congress in summer 2019 may limit the use and extent of stretch IRAs. Stay tuned to see if the rules change.

Can you still do a stretch IRA after the SECURE act?

Now, the Secure Act eliminates that option, except for persons designated as “Eligible Designated Beneficiaries.” Instead, it requires complete distribution of the inherited IRA within 10 years, which means fewer years for tax-deferred growth and likely higher tax bills.

When do you stop taking distributions from stretch IRA?

It’s important to note that the Stretch IRA-killing SECURE Act provision only affects accounts whose owners die after Dec. 31, 2019. For previously inherited accounts, the old rules still apply, and beneficiaries will still be allowed to take distributions over their life-expectancy period.

How old do you have to be to stretch an inherited IRA?

The stretch IRA is a made-up term (it’s not mentioned anywhere in the tax code) to describe the ability of IRA beneficiaries to stretch distributions from an inherited IRA over their lifetimes. For example, a 30-year-old beneficiary would be allowed to stretch distributions over 53.3 years, according to IRS life expectancy tables that govern this.