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When is a year not a year? When it is defined by the tax code, that’s when! Be careful when you hear of a “rule” like the new 10-Year Rule that requires non-eligible designated beneficiaries to empty out an inherited IRA under the Setting Every Community Up for Retirement Enhancement (SECURE) Act.

In previous articles, we have noted that a non-eligible designated beneficiary (i.e., with few exceptions, a non-spousal beneficiary) who inherits an Individual Retirement Arrangement (IRA) must empty out the entire account within 10 years of the death of the original IRA owner. Actually, according to the law, it is not 10 years from the date of the owner’s death; it’s the end of the 10th year following the date of death. So, if an IRA owner died on January 22, 2021, the account wouldn’t have to be cleared out until December 31, 2031 – almost 11 years from the death of the original owner.


But you would be in danger if you tried to apply this reasoning to the five year rule that applies to Roth IRAs. We’ve discussed in the past that Roth IRA contributions become qualified once the Roth IRA has been open for at least 5 years and the account owner is at least 59 ½ years old. It’s not 5 full years; it’s January 1st of the year that is 5 years from the year in which the Roth account was opened. So, if you opened a Roth IRA on November 30, 2020, the 5 year requirement would be met on January 1, 2025 – just a little over 4 years from when the account was opened. Of course, withdrawals from this account wouldn’t be qualified unless the account owner was also at least 59 ½.

The Roth rules can get even more confusing because any Roth qualifies towards the five year period. An individual who opened a Roth IRA back in 1997 when they were first introduced, and then closed out that Roth in 2008, can still use the date they opened the account as the beginning of the 5 year period for any subsequent Roths they open. If they opened a Roth IRA on May 15, 2021, the 5 year period would already be considered met because of the earlier Roth account they had.

When making decisions about taxes and investments, make sure you understand what all the terms mean. A year isn’t always a year. Consult an investment or tax advisor, or research the IRS rules yourself.

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