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Dow Incorporated Professionals: The IRS Changed the Rules for Inheriting Retirement Accounts Again

As Dow Incorporated employees approach Retirement, be aware of IRS changes regarding inherited Retirement accounts and possible legislative shifts, as these can affect your tax strategy and long-term Retirement readiness, says [Advisor Name], a representative of The Retirement Group, a division of Wealth Enhancement Group.

With IRS deferring new payout regulations for inherited IRAs, Dow Incorporated employees might want to reconsider withdrawal strategies and delay distributions to take advantage of tax deferral benefits, says [Advisor Name], a representative of the Retirement Group, a division of Wealth Enhancement Group.

In this article, we will discuss:

1. Regulations relating to Deferral of Inherited Retirement Account.

2. Effects of the Secure Act 2.0 on Retirement Planning.

3. Tax Advantages & Compliance for Inherited IRAs.

The Internal Revenue Service recently said it would delay implementation of new regulations regarding inherited retirement accounts. That move means certain beneficiaries will be able to withhold a required distribution in 2023, giving some temporary consolation to those struggling with inherited IRAs.

It is based on legislative changes begun in 2019 by Congress that change the requirements for inherited retirement funds. After those modifications, the expectation that the inherited funds would be exhausted within a decade was applied to most non-spousal beneficiaries and the prior provision was replaced with a lifetime distribution. So people who qualify for the 2023 prescribed minimum distributions (RMDs) are now exempt from the 10-year settlement obligation.

In the interim, beneficiaries have been left waiting for final IRS directives on 2019 retirement legislation. The new disclosure outlines the circumstances for 2023; but no comprehensive and enduring guidance remains, given that these beneficiaries still must liquidate their accounts within the ten-year timeframe.

Important for professionals at Dow Incorporated is how to structure withdrawals that are good for ten years. Actually, they are evaluating whether annual disbursements are mandatory or if they can put off withdrawals until the tenth year. Waiting too long before withdrawing funds may provide big tax advantages. By using this strategy, beneficiaries may also facilitate greater tax-deferred growth and delay withdrawals until they may be in a lower income tax bracket. This is because the IRS taxes withdrawals from inherited retirement accounts as income.

While the new guidance does not explicitly waive those annual RMDs, the penalty relief effectively exempts the affected taxpayers from those distributions through 2023, an IRS spokesperson said.

Proposed regulations from the IRS the year before also complicate things for beneficiaries. These regulations required successors to make yearly withdrawals every ten years if the original account holders had already made RMDs. Despite that ambiguity, the IRS exempted these beneficiaries from penalties for failing to receive distributions in 2021 or 2022. This exemption is valid until 2023 under the new directive.

Failure to follow the RMD provisions generally carries a 25% penalty equal to the required withdrawal amount. Some taxpayers have questioned whether they will have to reimburse the withheld distributions when routine enforcement is reinstated. In response, Grayson, Georgia-based IRA consultant Denise Appleby says retroactive compliance is highly unlikely if you miss a distribution.

The rules regarding spouses and other specific beneficiaries - including chronically ill - remain the same. These individuals are generally required to make yearly withdrawals for the duration of their projected lives. Furthermore, for accounts inherited before 2020, the previous regulations apply - beneficiaries must continue to receive yearly distributions throughout expected lifetimes.

The law is critical to retirement accounts - a subject that excites both retired Dow Incorporated employees and experienced professionals. The latest estimates from the Insured retirement Institute (2021) show that 24.3% of Baby Boomers - the majority approaching or already retired - have no savings for Retirement.

Since the IRS recently put off implementation of payout regulations for inherited IRAs, members of this demographic have a unique opportunity to craft retirement financial strategies that take full advantage of any possible tax deferrals and to consider the impact of inherited assets on comprehensive retirement plans. That event highlights the need to be informed about regulatory changes that may affect a person's retirement financial security.

Understanding recent IRS changes regarding inherited retirement accounts is like learning to handle unpredictable sea breezes. Just as adept sailors must quickly change their sails to stay on course and avoid capsize, so must Dow Incorporated retirees and those approaching retirement be flexible enough to handle such regulatory shifts.

Putting off implementation of new payout regulations is like a sudden gust of wind that if applied correctly can blow a ship forward with great potential for tax-deferred accumulation and quick withdrawals - or misconstrued and ignored - can cause turbulent conditions and possible consequences. Keep up with a constantly changing 'financial climate' and understand the 'navigation rules' set by the IRS to help steer retirement vessels toward financial security - especially with inherited assets.

Added Fact:

Besides the IRS adjustments, Dow Incorporated professionals approaching retirement should be aware of a less-publicized component of Secure Act 2.0, which would raise the age of required minimum distributions (RMDs) to 75 from 72. Such a change in retirement planning might alter plans to allow a longer growth period of retirement savings. For people turning 60, this could create new opportunities to optimize asset growth before mandatory distributions kick in - a strategy that could greatly improve retirement readiness. As legislative developments occur, this bill is one to watch closely for its direct impact on retirement strategies.

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Added Analogy:

Navigating new IRS rules on inheriting retirement accounts is like piloting a ship through the Panama Canal's tight turns. Like a captain who has to adjust to new lock sizes and water levels on a canal to keep the vessel safe on passage, Dow Incorporated professionals approaching or retiring from work must do the same with retirement account regulations. The canal is an engineering marvel that requires precise timing and knowledge of ship capabilities - just as precise and strategic financial planning is needed to take full advantage of tax advantages and account growth under new legislation. As the canal allows ships passage between two oceans, the new IRS rules allow retirees to navigate between current financial security and the legacy of their retirement assets.

Sources:

1. Internal Revenue Service (IRS). 'Retirement Plan and IRA Required Minimum Distributions FAQs.' Internal Revenue Service , 10 Dec. 2024, www.irs.gov/retirement-plans/plan-participant-employee/retirement-plan-and-ira-required-minimum-distributions-faqs .

2. Fidelity Investments. 'Inherited IRA Withdrawals | Beneficiary RMD Rules & Options.' Fidelity Investments , Jan. 2025, www.fidelity.com/learning-center/investment-products/iras/inherited-ira-withdrawals .

3. Lankford, Kimberly. 'SECURE 2.0 Act Summary: New Retirement Savings Changes to Know.' Kiplinger , Dec. 2022, www.kiplinger.com/retirement/retirement-plans/602453/secure-2-0-act-summary-new-retirement-savings-changes-to-know .

4. The Vanguard Group. 'RMD Rules for Inherited IRAs.' The Vanguard Group , 2025, www.vanguard.com/retirement-plans/inherited-iras/rmd-rules .

5. Mercer. 'IRS Sets 2025 for Final RMD Rules; Extends 10-Year Rule Relief.' Mercer , 25 May 2024, www.mercer.com/insights/2025-IRS-rmd-rules-final-relief.html .

How does The Dow Chemical Companyâ€™s pension plan structure impact an employee's retirement benefits when considering different retirement ages? The Dow Chemical Company offers various options in its pension plan, and understanding these can significantly affect financial planning for retirement. An employee must weigh the benefits of retiring earlier with potentially lower monthly payments against the advantages of working longer and how this aligns with personal retirement goals and expectations.

The Dow Chemical Company’s pension plan and retirement ages: The Dow Chemical Company’s pension plan structure impacts employees' retirement benefits based on their retirement age. Retiring earlier results in lower monthly payments due to reduced service time and potential early commencement penalties, while working longer allows for more service accrual and higher monthly benefits. Employees must evaluate how these factors align with personal retirement goals, as choosing to retire early might not provide as much financial security as delaying retirement(The Dow Chemical Compan…).

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20% mandatory withholding tax on lump-sum distributions: Lump-sum distributions from The Dow Chemical Company’s pension plan are subject to a 20% mandatory withholding tax if not directly rolled over into another qualified retirement plan. This tax can significantly impact an employee's immediate finances. However, opting to roll over the lump sum to a qualified plan defers taxation until funds are withdrawn, allowing employees to manage their tax liabilities better while continuing to grow their retirement savings(The Dow Chemical Compan…).

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Appealing pension benefit decisions: If employees believe there has been an error in the administration of their pension benefits, The Dow Chemical Company provides a formal appeal process. Employees can file a claim, and if denied, they have the right to appeal the decision. The Retirement Board oversees these appeals, and employees must follow the outlined procedures for their appeal to be considered(The Dow Chemical Compan…).

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Maximizing pension benefits: Employees at The Dow Chemical Company can maximize their pension benefits by carefully planning their retirement timing. Key strategies include working longer to accrue more service years, reviewing contribution limits, and understanding the benefit formula used. Aligning personal savings and pension claims with the optimal retirement age can result in more favorable financial outcomes(The Dow Chemical Compan…).

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How can employees of The Dow Chemical Company reach the benefits service center for additional inquiries regarding their pension plan, and what information should they prepare beforehand? Knowing how to contact the benefits service center is crucial for employees seeking clarity on their pension plan benefits. Preparing relevant information ahead of time can streamline the process, allowing for a more productive engagement with benefits specialists and ensuring that employees receive precise guidance tailored to their situations.

Contacting the benefits service center: Employees seeking clarification about their pension benefits can reach the Dow Benefits Service Center via phone or online through the Message Center. It is recommended to have personal identification and details of the pension plan ready to streamline the inquiry process. Proper preparation ensures a productive conversation with benefits specialists(The Dow Chemical Compan…).

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For more information you can reach the plan administrator for Dow Incorporated at 1919 torrance blvd Torrance, CA 90501; or by calling them at 900-999-1009.