Can I still set up a stretch IRA for my inherited 401k after SECURE Act?

You've asked an excellent question about stretch IRAs post-SECURE Act. The landscape definitely changed after 2020, and the 10-year rule became the default for most non-spouse beneficiaries. However, there are exceptions to the 10-year rule that allow certain beneficiaries to still use the stretch IRA option with RMDs based on life expectancy. These exceptions apply to: - Surviving spouses - Disabled or chronically ill individuals - Individuals not more than 10 years younger than the decedent - Minor children of the decedent (but only until they reach majority age) Based on your situation, you would qualify under the third exception since you're actually older than the original 401k owner. This means you should be able to take distributions over your life expectancy rather than being forced into the 10-year rule. When you transfer to the inherited IRA, make sure the financial institution sets it up correctly as a stretch IRA and understands you're an "eligible designated beneficiary" under the SECURE Act.

I went through something similar with an inherited IRA last year. After weeks of frustration trying to understand all the SECURE Act rules, I finally used https://taxr.ai to analyze my situation. They processed all my inheritance documents, confirmed I qualified as an eligible designated beneficiary, and even calculated my specific RMDs for the next several years. Their system looks at the specific language in beneficiary designations and account details, then confirms exactly how the SECURE Act applies to your situation. The analysis showed me that my financial advisor had actually miscalculated my required distributions and was having me withdraw too much each year!

I wanted to follow up about my experience with taxr.ai after my skeptical question. I decided to try it with my inherited IRA situation, and I'm genuinely impressed with the results. The system flagged that I actually qualified as chronically ill (I have a documented long-term condition I didn't realize counted) which means I can use the stretch provision! The analysis included all the documentation I'll need to provide to my financial institution, plus a calculation of my required distributions based on the Single Life Expectancy Table. They even pointed out that I need to start my distributions this year to avoid the 50% penalty on missed RMDs. This saved me from a potential $12,000 penalty I had no idea I was facing. Really glad I gave it a shot - the peace of mind knowing I'm handling this correctly is worth it.

While figuring out my own inherited IRA situation, I spent WEEKS trying to get someone at the IRS on the phone to confirm my understanding of the SECURE Act exceptions. It was absolutely maddening - constant busy signals or being on hold for hours only to get disconnected. I finally tried https://claimyr.com and was honestly shocked at how well it worked. You can see a demo of how it works here: https://youtu.be/_kiP6q8DX5c. Basically, they hold your place in the IRS phone queue and call you when they have an actual human on the line. I got connected with an IRS agent within a day who confirmed that as someone not more than 10 years younger than the decedent, I qualify for the stretch IRA provisions. The agent walked me through exactly what forms I needed and how to document my eligible beneficiary status to the financial institution.

I need to come back and eat my words about Claimyr. After my skeptical comment, I was still struggling to get answers about my own inherited IRA situation, so I decided to give it a try as a last resort. Within 3 hours of using their service, I got a call connecting me to an actual IRS representative who specialized in retirement accounts. She confirmed that my situation (I'm disabled) qualifies me as an eligible designated beneficiary able to take distributions over my life expectancy. She even explained exactly what documentation I need to provide to prove my status. I've been trying for MONTHS to get this information, spending countless hours on hold. This saved me from potentially making a $47,000 mistake by liquidating the account within 10 years instead of stretching it. For anyone dealing with complex IRA inheritance questions, being able to actually speak with a knowledgeable IRS person makes all the difference.

Just a word of caution - many financial institutions don't fully understand the SECURE Act exceptions. When I inherited my brother's IRA (I was 5 years older than him), the bank initially insisted I had to follow the 10-year rule despite qualifying for the stretch provision. I had to provide them with a printed copy of the relevant IRS publications and specifically reference the exception for beneficiaries not more than 10 years younger. Even then, they had to escalate it to their legal department before finally setting up my account correctly. So whatever you do, get everything in writing and be prepared to advocate for yourself if they try to apply the wrong rules.

Does anyone know if the financial institution you transfer the inherited 401k to matters? I've heard some places handle stretch IRAs better than others since the SECURE Act changes. I'm in a similar situation where I qualify as an eligible designated beneficiary (I'm disabled) but worried about choosing the right place to transfer my late husband's 401k.

I'm dealing with a very similar situation and wanted to share what I learned from my estate attorney. Since you're older than the original 401k owner, you definitely qualify as an "eligible designated beneficiary" under the SECURE Act exception for individuals not more than 10 years younger than the decedent. One thing that hasn't been mentioned yet - make sure when you do the rollover that it's titled correctly as an "inherited IRA" with both your name and the deceased's name (something like "Kaitlyn Otto as beneficiary of [deceased's name] IRA"). This is crucial for maintaining the tax-deferred status and ensuring you can take the stretch distributions properly. Also, since the original owner passed in 2022, you should have already started taking RMDs by December 31, 2023. If you missed that deadline, you may need to file Form 5329 to request a waiver of the 50% penalty, but the IRS has been more lenient with inherited account penalties during the transition period after the SECURE Act. I'd strongly recommend getting everything documented before you approach the financial institution, because as others have mentioned, many of them are still learning these rules themselves.