We are surrounded with information – and misinformation. Finding accurate up-to-date facts is increasingly difficult. Do an internet search and you will likely run into obsolete websites that have not been updated in years, paywalls demanding you subscribe before getting access, and sites completely generated by AI with very limited human involvement.

We at the Slott Report are the exception to this dismal reality. Several times a week, our retirement account experts (actual humans!) write blogs tackling some of the most complicated issues affecting retirement accounts.

We get many questions about the SECURE Act and its impact on inherited retirement accounts. We were curious how AI would handle these inquiries. So, we asked AI the following question:

“How does the SECURE Act affect inherited IRAs received by a non-spouse beneficiary?”

Here is the response from AI:

“They must be distributed within 10 years, regardless of the beneficiary’s age.”

At first glance this may seem like the right answer. After all, the SECURE Act did replace the stretch IRA with a new 10-year rule for many IRA beneficiaries. However, that is not the full story. Nothing in the tax code is that simple.

While the majority of non-spouse beneficiaries are subject to the 10-year rule, some are not. In fact, some beneficiaries are not subject to the 10-year rule specifically because of their age. Due to their age, some living non-spouse beneficiaries are eligible designated beneficiaries (EDBs) who can still get the stretch and are not required to use the 10-year rule. Examples include both minor children of the account owner and beneficiaries who are not more than 10-years younger than the deceased account owner.

Non-spouse beneficiaries who are not living, breathing entities are subject to a completely different set of rules. The 10-year rule does not apply. Instead, those beneficiaries (such as an estate) would be subject to either the five-year rule or annual distributions based on the remaining single life expectancy of the deceased IRA owner (the “ghost” life rule).

AI can be a valuable tool, but it has its limits. Using AI might be helpful, but it can fall significantly short of providing all the important details. And what you don’t know can hurt your IRA. When it comes to accurate, up-to-date information on retirement accounts, you can count on the living, breathing humans who bring you the Slott Report to give you the full and accurate story.

By Sarah Brenner, JD
Director of Retirement Education