Secure Act and required inherited IRA withdrawal

[pdxvandal]

I am in the fortunate position of receiving an inheritance when I turn 59.5 (although I could easily be fine without it). I'm estimating the inherited IRA will be about $300-$400k in today's dollars. With the Secure Act's new requirement of withdrawing the money in a 10-year window, I now wonder if I should tap into the inherited IRA for most living expenses in my 60s while drawing down my own IRAs in my 50s and 70s.

Pre-Secure Act, my plan was to tap into the inherited IRA only when absolutely needed in my 50s/60s/70s or 80s, if I make it that long. But I'd rather reduce any potential tax implications for my child if she then inherits it.

Is this changing anyone's FIRE plan if they are expecting an inherited IRA? A first-world problem, I know, but curious what other MMMers think.

[terran]

Yes, I would withdraw from an inherited IRA before a non inherited IRA and that keeps things most flexible. I probably would have done that before the SECURE act though as your own IRA can be converted to Roth, but an inherited IRA can't. You may want to consider Roth converting some of your own IRA in addition to the inherited IRA withdrawals during the 60-70 timeframe. Your goal should be to keep your taxable income as equal as possible throughout your life as that will tend to reduce the total amount of tax your pay.

[Catbert]

I'm confused.  Have you already inherited the IRA (i.e., has the originator who is not your spouse died already)?  Or are you anticipating inheriting an IRA at some point in the future?

You turning 59.5 has nothing to do with when or how much you take out of an inherited IRA.  Also as I understand it, SECURE act is not retroactive.  If you already inherited it then current rules apply and you can do a stretch withdrawal.

[pdxvandal]

I would be inheriting this IRA in the future, at age 59.5. It originated from my grandfather's estate, but my mother put in a provision with her financial advisor that I can't access it until retirement age.

[Catbert]

Still makes no sense to me.  Are you sure that you can't access until 59.5.  If it's really as simple as telling a financial not to allow distribution until 59.5 that's the perfect loophole to the SECURE act.

[ixtap]

Your grandfather and your mother have passed?

How is the inherited IRA titled? If it is in a trust, it is possible the trust is taking RMDs and what you will receive at 59.5 is from the trust, rather than directly from the IRA. This isn't actually very common, but is sometimes used to hold money back until the child reaches a certain age.

I really think you need to confirm the details before making the decisions you ask about in your OP.

[pdxvandal]

My mother inherited the account, but has not touched the principal or withdrawn anything. Yes, it's part of a trust and it's stipulated in writing that my sibling and I can't withdraw until we're at least 59.5 ... to avoid multiple Vegas benders and yacht shopping ... I don't know ;). Even if she passed away today, I wouldn't be able to access that account until 59.5, unless the trust agreement is revised.

My mother could technically withdraw on it, but she has a nice pension, withdraws from her own IRA as well as takes Social Security ... and has a paid-off home.

Anyway, per Catbert's last comment, I wonder if there is a loophole. But it seems to me withdrawals would already have had to be occurring for me to avoid this new required 10-year withdrawal window.

I'll report back with more details when I get them. Thanks.

[EvenSteven]

It seems to me that the Secure Act is not retroactive, so the inherited IRA, which is your mothers, is not subject to anything in the Secure Act. When she passes, and leaves either that inherited IRA or any other of her IRA's to you, then those would become subject to the 10 year withdrawal rule when you inherit them.

[Catbert]

I found some info about trusts as beneficiaries of IRAs.


https://www.investopedia.com/retirement/designating-trust-as-retirement-beneficiary/