Have you inherited an IRA from a non-spouse who passed away after 1/1/2020? Beneficiaries of pre-tax retirement accounts have always had to pay taxes on what they inherit. However, on 1/1/2020, the SECURE Act was passed, changing the annual amount that beneficiaries would have to withdraw. Beforehand, non-spousal beneficiaries could:

1. Cash out the account in one lump sum and pay taxes on that amount
2. Take the account out over five years and pay taxes on it
3. Take distributions the year after the account owner passed away and take withdrawals over their lifetime (a stretch IRA)

Most non-spousal beneficiaries must empty their inherited account within 10 years following the original owner's death (there are some exceptions for someone who is disabled, the chronically ill, those who are within 10 years of age of the deceased, and minor children).

Unfortunately, the IRS made some changes. Learn what it is—and if it impacts you—in this episode of Retire with Ryan.

• [1:50] My on-demand Retirement Readiness Review Course
• [2:16] What’s new with inherited IRAs?
• [5:56] The IRS announcement about required minimum distributions
• [9:32] The IRS changed the penalty for missing IRA distributions
• [10:07] IRS Notice 2044-25: The RMD for 2024 is being waived
• [11:13] What should you do with this information?
• [13:04] What if you inherited a Roth IRA?

Everyone thought that non-eligible beneficiaries who opted for the 10-year window could choose how to withdraw the funds (as long as the account was emptied). We thought that you could minimize distributions in years where their income was higher and take higher distributions when their income was lower, choosing when to pay taxes on the account (and avoiding being in a higher tax bracket).

Unfortunately, in February 2022, the IRS issued regulations to reflect the changes in the SECURE Act. They divided non-eligible beneficiaries into two groups:

1. People who inherited an account from someone who passed away before they reached their RMD age.
2. Someone who passed away after they reached their RMD age.

If you inherit an IRA from someone who hadn’t yet reached their RMD age could wait until the 10th year to take distributions. However, if the person died after they’d started taking RMDs, the beneficiary would have to take distributions out every year (continuing the distributions of the original owner).

Thankfully, the IRS extended some relief and said if you were supposed to take RMDs in 2021–2024, the requirement would be waived.

The IRS also changed the penalty for missing IRA distributions from 50% and reduced it to 25%. If you missed a year where you were supposed to take it—as long as you make up the difference in two years—the penalty would be reduced to 10%.

It’s time to do some tax projections of your future income. If you’ve inherited a retirement account, you must deplete it in the next 10 years. If you anticipate being in a higher tax bracket in the future, it may make more sense to take a distribution this year in a lower tax bracket.

If you inherited an IRA in 2020, you still have seven years left to empty the account. How will it impact your taxes? Where will a distribution land you on the tax bracket scale?

What if you inherited a Roth IRA? Listen to hear how required minimum distributions work for an inherited Roth IRA!

• Retirement Readiness Review
• Subscribe to the Retire with Ryan YouTube Channel
• New Beneficiary IRA Distribution Requirements, #180

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If you are divorced and approaching 62, you may qualify for social security benefits based on your ex-spouse's earning record. But who qualifies? When can you collect it? How much can you collect? Does your ex-spouse find out? I’ll answer the things you need to know in this episode of Retire with Ryan.

• [1:11] Sign up for Retirement Readiness Review
• [1:46] Divorce and social security
• [3:12] What makes you eligible for the benefit?
• [6:28] Other things you need to know
• [8:06] How much can you receive?
• [11:49] What if your ex-spouse is deceased?
• [13:51] How to apply (and what you need)
• [16:43] What should you do if you’re divorced?

You’re eligible if:

• You were married at least 10 years
• You haven’t remarried
• Your ex-spouse is 62 or older and eligible for benefits
• The divorce occurred at least two years prior to applying
• Your ex-spouse doesn’t need to have filed for benefits

Your own benefit cannot be higher than the spousal benefit. That simply means that you’re able to apply for your benefits and the spousal benefit and choose the higher of the two. You’re eligible for up to half of your ex-spouse's benefit or your own.

What else do you need to know?

• Benefits for current or other ex-spouses are not affected. If your ex-spouse is collecting, it won’t impact what they’re receiving.
• Secondly, your ex-spouse cannot stop you from claiming this benefit. They have no control over this.
• Divorce settlements have nothing to do with this. If you qualify, you’re entitled to the benefit.
• Lastly, any ex-spouse can claim benefits. Your spouse could claim up to half of your benefit as well.

If you were born after 1960, your full retirement age is 67 or later. For anyone born before 1959, your full retirement age is 66 and 10 months. Every year before that the full retirement age decreases by two months. Why is this important?

To get the full 50% ex-spousal benefit, you have to wait until your full retirement age. If your full retirement age is 67 and you want to collect at 62, you’d get 32.5% of your ex-spouse’s full retirement benefit. If you waited until you turned 63, you’d get 35%. The percentage increases every year until it caps at 50% when you hit your full retirement age.

If you claim your benefit before your full retirement, there’s also a limit to how much you can earn and still receive the benefit. The earnings limit in 2024 is $22,320. That limit is in effect from 62–66. If you earn over that amount, your benefit will be reduced by $1 for every $2 you make over $22,320.

The year you retire, you can make up to $59,520 before your benefit is reduced by $1 for every $3 you’re over. Starting the month you retire, there’s no limit and you can receive your full benefits.

This is known as a surviving divorced spouse benefit. The same eligibility rules apply—with a few changes:

• You can start climbing benefits as early as age 60 (with a reduction)
• You can apply for the survivor benefit as a restricted application and let your own benefit grow

If your benefit is more than half of your deceased ex-spouse’s benefit, you can collect the percentage you’re eligible for while yours continues to defer. Your benefit caps out at 70 at which point you’d collect your benefit.

• Retirement Readiness Review
• Subscribe to the Retire with Ryan YouTube Channel
• Online social security calculator
• SSA.gov

www.MorrisseyWealthManagement.com/contact

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