Starting January 1, the recently passed Secure Act made rule changes to IRAs and Inherited IRAs. If you are near 70 ½ or will inherit an IRA from someone other than your spouse, then these changes will affect you. 

Previously, if you inherited an IRA or 401(k) from a non-spouse then you could take the required annual distributions over your lifetime in order to minimize your tax hit. Congress wants their money earlier so they now give beneficiaries a 10-year window to draw down an inherited IRA account. 

If you already have an Inherited IRA does this rule apply to you? Thankfully not. I’m one of the many people who are taking yearly distributions from an Inherited IRA. Even with the distributions my account is higher now than when I received it. That’s because the stock market has gone up and I follow my own investment advice (of course). This rule does not apply to those of us that had already owned an Inherited IRA on December 31 so we can continue to extend and defer our taxes.

The Secure Act made another change, this time to the required distribution age for owners of regular IRA accounts. Previously, individuals were required to start taking yearly distributions at the age of 70 ½ (how did they ever choose that age?). Now, because people are living longer, the required distribution age is bumped up to 72. 

If you turned 70 ½ last year and began taking distributions then this change does not affect you. If, however, you turn 70 ½ in 2020 then you can now wait until you turn 72 to begin distributions. Put another way, someone who was born in the first half of 1949 follows the old required distribution rules, while someone who was born in the second half of 1949 or later does not. 

Of course it is possible that the IRS will provide more guidance on these rules so check with your tax professional before making any decisions.