Required Minimum Distributions (RMDs) can be complex, especially if you’ve inherited a retirement account. With recent regulatory changes, understanding when and how much you must withdraw is crucial.
Old Rules vs. New Rules for Beneficiaries
The SECURE Act, passed in December 2019, significantly changed RMD rules for beneficiaries of inherited retirement accounts:
Before the SECURE Act (for deaths occurring before January 1, 2020): Beneficiaries could often “stretch” distributions over their lifetime, significantly reducing annual tax burdens.
After the SECURE Act (for deaths occurring on or after January 1, 2020): Most non-spouse beneficiaries must fully distribute the inherited account within 10 years after the account holder’s death. Exceptions exist, including spouses, minor children, disabled individuals, chronically ill individuals, and beneficiaries less than 10 years younger than the deceased.
Why You Need to Take RMDs in 2025
Under the new rules, beneficiaries subject to the 10-year rule who inherited retirement accounts from account holders who had already begun taking RMDs (typically at age 72 or later) must now take annual distributions, not just a lump sum at the end of 10 years. The IRS clarified that these annual distributions need to begin immediately if the original account owner had started RMDs at their time of death.
If you inherited a retirement account in 2020 or later and have not yet begun annual withdrawals, 2025 is particularly critical. This is because:
The IRS provided relief for missed RMDs in previous years due to confusion around these rules. However, starting in 2025, failure to comply could result in substantial penalties.
Beginning RMDs now helps avoid larger, lump-sum tax implications down the line.
Action Steps for 2025
Confirm the year the account holder passed away and whether they had started RMDs.
Calculate your required annual distribution based on your age and account balance.
Schedule your distribution promptly to avoid penalties.
Staying proactive about your RMD obligations ensures compliance and maximizes the value of your inherited assets.
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