IRS finalizes 10-year retirement payout rules, making things ‘even more crazy complicated’

The Internal Revenue Service (IRS) and the Treasury Department have published final regulations updating the required minimum distribution (RMD) rules for beneficiaries with a 10-year return period.

ThinkAdvisor believes these provisions, which arise from the SECURE and SECURE 2.0 Acts, confirm that most IRA beneficiaries must make distributions annually for 10 years following the account holder’s death.

Key highlights of the final regulations include:

Non-qualified beneficiaries covered by the 10-year rule must take required minimum distributions (RMDs) each year.
Individual recipients who have begun taking required annual distributions must continue to do so even if the account balance is paid in full within 10 years.

Ben Henry-Morelandsenior 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, spousal beneficiaries now have three different options for how to handle a deceased spouse’s retirement account, each with its own RMD calculation.

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Jeff Levinechief financial planning nerd at Kitces.com, points out that annual distributions over the 10-year period are required if death occurs on or after the Required Start Date (RBD). However, due to prior IRS notices, that period won’t apply until 2025.

The IRS and Treasury also issued proposed regulations addressing additional RMD issues under the SECURE 2.0 Act. They are seeking public comment on these proposed regulations, which include other changes related to RMDs.

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

The financial planning community is currently awaiting further guidance on other provisions of SECURE 2.0, such as the rollover of unused funds from 529 plans to Roth IRAs.

The new rules underscore the changing landscape of retirement planning and the growing importance of expertise in navigating the complex tax rules surrounding retirement accounts.

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This article IRS Finalizes 10-Year Pension Withdrawal Rules, Makes Things ‘Even More Crazy Complicated’ originally appeared on Benzinga.com