New IRS RMD Clarifications: What You Need to Know for 2025

The IRS recently issued new guidance on Required Minimum Distributions (RMDs) for inherited IRAs, addressing confusion caused by the SECURE Act of 2019. If you’ve inherited an IRA, it’s crucial to understand these changes to ensure compliance and avoid potential penalties in 2025 and beyond.

What’s Changed?

Under the SECURE Act of 2019, most non-spouse beneficiaries must withdraw the full balance of an inherited IRA within 10 years. Initially, many assumed they could wait until the final year to take distributions. However, the IRS later clarified that if the original account holder had already started taking RMDs, beneficiaries must also take annual withdrawals for the first nine years.

What Does This Mean for 2025?

The IRS recently issued Notice 2024-35, which provides relief for those who may have missed required distributions from 2021-2024. Here are the key takeaways:

• If you inherited an IRA from someone who had already begun taking RMDs, you were not penalized for missing withdrawals in 2021-2024.
• This applies to IRA owners who passed away in 2020 or later.
• The rule officially takes effect on January 1, 2025, meaning the waiver for missed RMDs no longer applies after this calendar year.

Who is Exempt from the 10-Year Rule?

The SECURE Act’s 10-year withdrawal requirement does not apply to:

• Surviving spouses
• Minor children of the original account holder (until they turn 21)
• Individuals with disabilities or chronic illness
• Non-designated beneficiaries, such as charities or estates
• Accounts inherited before 2020

Next Steps: Are You Prepared for 2025?

These evolving rules can have a major impact on your retirement planning strategy. If you’ve inherited an IRA or plan to in the future, now is the time to review your withdrawal strategy to ensure you remain compliant.

Not sure what this means for you? Let’s set up a time to discuss your situation and make sure you’re on track. Reach out today to schedule a call!