As part of the ongoing rollout of SECURE Act 2.0, the IRS finalized several new regulations in late 2024 and early 2025. These rules clarify how Required Minimum Distributions (RMDs) work for both IRA owners and beneficiaries, building on earlier changes first introduced under the original SECURE Act in 2019 and expanded in 2023.
For individuals, families and organizations committed to faithful stewardship, understanding these updates can help ensure retirement accounts are managed thoughtfully and in alignment with long-term goals.
A Quick Refresher: What SECURE 2.0 Changed
SECURE Act 2.0 introduced several important updates to retirement planning. The RMD starting age increased from 72 to 73 in 2023, with another increase to 75 scheduled for 2033. The law also expanded catch-up contributions, broadened Qualified Charitable Distribution (QCD) rules and allowed for more flexibility in emergency and certain life-event withdrawals.
The latest IRS guidance clarifies how several of these provisions apply, especially for inherited IRAs.
Updated RMD Ages for IRA Owners
If you own an IRA, the new rules specify when your RMDs must begin based on your birth year:
- Born 1951–1959: RMDs begin at age 73
- Born 1960 or later: RMDs begin at age 75
RMDs are the minimum amounts that must be withdrawn from retirement accounts each year once you reach the required age. These withdrawals are generally taxable, and failing to take them can result in penalties.
The updated RMD ages offer some added planning flexibility, but delaying may mean larger distributions later. It’s important to evaluate your overall goals and tax situation before adjusting your strategy.
New Classifications for IRA Beneficiaries
The IRS has now finalized how IRA beneficiaries are categorized. These definitions matter because they determine which payout rules apply.
Designated Beneficiaries. These are individuals specifically listed on the account documents.
Eligible Designated Beneficiaries. A beneficiary is considered an “eligible designated beneficiary” only if they meet one of the following criteria:
- Surviving spouse
- Someone who is not more than 10 years younger (or can be older) than the IRA owner
- The account owner’s minor child
- A person who is disabled
- A person who is chronically ill
Non-Person Beneficiaries. Any non-person beneficiary — including a trust or charitable organization — is treated as its own separate type of beneficiary with different payout rules.
Inherited IRA Rules: What Beneficiaries Need to Know
For beneficiaries of IRAs whose owners died in 2020 or later, the IRS has now clarified the distribution requirements:
- All beneficiaries may take a lump-sum distribution if they choose.
- Many beneficiaries must pay out the entirety of the account within 10 years, depending on whether the original IRA owner had already begun taking RMDs.
- Surviving spouses continue to have additional options, including treating the IRA as their own.
Because IRS guidance was still evolving, the RMD requirement for inherited IRAs was waived through 2024 and no penalties were issued. Beginning in 2025, beneficiaries must take RMDs as required or risk an excess accumulation penalty.
Some beneficiaries may also have extended time for their first distribution, depending on how and when they file their taxes. We recommend you consult a tax advisor for further guidance.
Why These Changes Matter
If you are an IRA owner, now is a good time to review your beneficiary designations to ensure your estate plan is up to date and consistent with your goals. Beneficiary choices can significantly affect the tax treatment and distribution timeline for those who inherit your account.
If you are a beneficiary, taking time to understand the payout rules and RMD requirements can help you avoid penalties and make informed decisions about timing, taxes and long-term financial planning.
Our team at New Covenant Trust Company is here to help you understand how these rules apply to your unique situation. Please don’t hesitate to contact us at 800-858-6127, Option 6.