Do You Have to Quickly Spend an Inherited IRA?

Do IRA beneficiaries have a short time window to withdraw from their inheritance?

Q: I don’t know if this is important or not. I heard somewhere a beneficiary’s window is quite short to reinvest or spend their 401k inheritance.

A: A spouse beneficiary can rollover to their own IRA, which will allow them to use the uniform lifetime table life expectancy which is very favorable. Thanks to the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 that went into effect in 2020, the stretch IRA was eliminated and replaced with a 10-year payout for all beneficiaries, except for certain Eligible Designated Beneficiaries:

  • Surviving Spouse
  • Minor children (but not grandchildren) up to majority – age 18 in most states (or up to age 26 if still in school)
  • Disabled individuals – subject to the strict IRS standard 
  • Chronically ill
  • Beneficiary not more than 10 years younger than the IRA owner
    (or plan employee)

Effective: For deaths after 2019. For deaths in 2019 or prior years, the designated beneficiary could use the single life expectancy table for the year after death every year after that and subtract one. See IRS link for non-spouse inheritance prior to 2020.

About the Author

Carol Schmidlin, Certified Financial Fiduciary®, MRFC® is the President of Franklin Planning and has been advising clients on how to grow and preserve their wealth for 25 years. In addition to her financial planning practice, she is the founder of FedSavvy® Educational Solutions, which provides Financial and Retirement Literacy Programs for Federal Employees. She is passionate about helping families with all phases of Wealth Management and is a member of Ed Slott’s Master Elite IRA Advisor Group. Her practice maintains a home office in Sewell, NJ along with a satellite office in Washington, DC. Carol can be reached at (856) 401-1101.