Surprise! You May Still be Eligible for the Stretch IRA
The arrival of the SECURE Act means the end of the stretch IRA for many beneficiaries. Instead, a 10-year payout rule applies for most IRAs inherited by non-spouse beneficiaries. However, the SECURE Act does allow the stretch to continue for certain select groups of beneficiaries. These beneficiaries are called “eligible designated beneficiaries” (EDBs). EDBs include spouse beneficiaries, minor children of the account owner, as well as disabled and chronically ill individuals.
Not More Than 10-Years Younger
Beyond the above listed groups of EDBs, there is another group of EDBs that may surprise you. This group is often overlooked, and many people are unaware of just how common it can be. A beneficiary who is not more than 10 years younger than the deceased IRA owner (based on their actual birthdates) also qualifies as an EDB. Under this definition, any beneficiary older the account owner would also be an EBD. This group of beneficiaries can include an unexpectedly large number of people. For example, siblings, friends, and unmarried partners, who are often named as beneficiaries, are all frequently close in age.
Example: Eli, age 65, dies in 2025. He has two IRAs. The beneficiary of one IRA is his older brother, Ben, age 77, and the beneficiary of the other IRA is his good friend, Thomas, age 60. Both Ben and Thomas qualify as EDBs because they were not more than 10 years younger than Eli. Therefore, they can both use the stretch IRA. They can take distributions from the IRAs they inherited from Ben using their single life expectancy. They are not required to use the 10-year rule.
Are You An EDB?
If you have inherited an IRA, you should not assume that the 10-year rule applies, even if you are a non-spouse beneficiary. Are you older than the IRA owner was? Or, were you close in age? That can make you an EDB, which changes your options for inherited IRA funds. If you are not more than 10 years younger than the account owner was, you are part of a surprisingly large group of beneficiaries who are still eligible for the stretch, even after the SECURE Act.
By Sarah Brenner, JD
Director of Retirement Education
Ed Slott and Company, LLC
Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007.