SECURE Act Has Changed the Inherited IRA Rules

The IRS recently proposed a major change in the way inherited IRAs work for those subject to the SECURE Act’s 10-year rule. Inheritors need to be ready.

A toddler holding a fork has spaghetti all over her head, face and bib.
(Image credit: Getty Images)

When Congress proposes a tax law that affects your retirement plan, should you take steps in anticipation of the change? Sometimes this can work against you. For example, thinking Congress would raise income taxes last year, some taxpayers sold stocks, hoping to pay taxes on their gains at the then current low rates. However, Congress did not raise taxes, and the stock market has since come off historical highs, generating losses in 2022. Trying to save on taxes, these individuals ended up paying taxes a year earlier on stocks valued at market highs. Their strategy failed.

As a general rule, trying to anticipate tax law changes is akin to market-timing your investments: It’s often not a good idea. What if, instead, your concern isn’t a proposed tax law from Congress, but a proposed regulation from the Treasury/IRS? This is where it gets trickier. Proposed tax regulations are meant to interpret already existing law. In theory, regulations just clarify what current law already says.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Steve Parrish, J.D., RICP®
Co-Director, Retirement Income Center, The American College of Financial Services

Steve Parrish, JD, RICP®, CLU®, ChFC®, RHU®, AEP®, is an Adjunct Professor of Advanced Planning and Co-Director of the Retirement Income Center at The American College of Financial Services. His career includes years spent as a financial adviser, attorney and financial service company executive. He focuses on law, estate planning, taxes and financial strategies that can help enable a successful retirement.