Inherited IRA Rules: What You Need to Know About the 10-Year Rule

What is the 10-year rule for inherited IRAs?

The 10-year rule requires most non-spouse beneficiaries who inherit an IRA to withdraw the entire account balance by December 31 of the 10th year following the original owner's death. Whether annual withdrawals are also required during that window depends on whether the original account owner had already started taking Required Minimum Distributions before they passed. Getting this wrong can mean a penalty of up to 25% of the amount you were supposed to withdraw.

Why This Changed and Why It Matters Now

There used to be a strategy called the stretch IRA. It allowed beneficiaries to take withdrawals from an inherited IRA over their own lifetime, spreading out the tax impact over decades and letting the account continue growing tax-deferred.

Congress eliminated that option for most non-spouse beneficiaries in the SECURE Act of 2019. The 10-year rule replaced it, requiring most non-spouse beneficiaries to fully distribute inherited IRA assets by December 31 of the tenth year following the original owner's death.

Then the rules got more complicated. For years after the SECURE Act passed, there was genuine confusion about whether annual withdrawals were required during the 10-year window or whether you could simply wait and take everything in year ten. The IRS issued final regulations in July 2024 that resolved that ambiguity. Those rules are now fully in effect for 2026.

If you inherited an IRA in 2020, 2021, 2022, or 2023, you are already mid-window. And if the original owner had started taking RMDs before they passed, annual distributions were required starting in 2025. This is not a future concern for many people. It is a current one.

If you are not sure what type of account you inherited or what the rules mean for your specific situation, start with Understanding the Types of Assets You Might Inherit.

The Key Question: Had the Original Owner Started Taking RMDs?

Everything in inherited IRA planning hinges on one fact: whether the person you inherited from had already started taking Required Minimum Distributions before they died.

RMDs generally begin at age 73 under current rules. That date is called the Required Beginning Date, and it is the dividing line that determines what you are required to do.

If the original owner had NOT yet started RMDs:

You can withdraw at any pace you choose, in any amount, at any time during the 10-year window. There is no annual minimum. The only hard requirement is that the account must be fully emptied by December 31 of the 10th year.

This gives you meaningful flexibility to plan your withdrawals around your own income and tax situation.

If the original owner HAD started RMDs:

You must take annual RMDs each year for years one through nine, calculated based on your own life expectancy, and the account must be fully emptied by the end of year ten. Missing an annual RMD carries a 25% penalty on the amount you were supposed to withdraw, though that can be reduced to 10% if corrected within two years.

One more thing worth knowing: if the original owner had an RMD due in the year they died and had not yet taken it, you as the beneficiary are responsible for taking that distribution by December 31 of the year of death.

Who Does Not Have to Follow the 10-Year Rule

Not everyone is subject to the 10-year rule. A category of beneficiaries called Eligible Designated Beneficiaries, or EDBs, can still stretch distributions over their own life expectancy. EDBs include:

• Surviving spouses
• Minor children of the original account owner (until age 21, at which point the 10-year rule kicks in for the remaining balance)
• Individuals who are disabled or chronically ill
• Beneficiaries who are not more than 10 years younger than the original owner

That last category is worth flagging because it is the one most often missed. The test compares birth dates, not ages at death. A sibling who is 8 years younger qualifies as an EDB. A sibling who is 11 years younger does not.

If you fall into any of these categories, your options are more flexible and worth exploring with a financial advisor before you make any decisions.

If You Are a Surviving Spouse

Spouses have the most flexibility of any beneficiary, and the decision you make here matters.

Your main options are to roll the inherited IRA into your own IRA, treating it as if it were always yours, or to keep it as an inherited IRA. Rolling it into your own IRA is generally the best option for most spouses. It maximizes flexibility, eliminates inherited IRA restrictions, and allows continued contributions if you are still working.

Keeping it as an inherited IRA can make sense in specific situations, particularly if you are under 59½ and need to access the funds without triggering the early withdrawal penalty that applies to your own IRA. An advisor can help you think through which path makes more sense for your situation.

The Tax Picture

Every dollar you withdraw from an inherited traditional IRA is taxed as ordinary income at your tax rate. This is the piece that catches people off guard.

If you inherit a $400,000 traditional IRA and pull the entire balance in year ten, that $400,000 gets added to your taxable income for that year. Depending on your other income, that could push you into a significantly higher tax bracket.

The real planning challenge is not whether funds must be withdrawn, but when and how. Spreading withdrawals strategically across lower-income years can reduce the tax hit considerably. For example, if you know you are taking time off work, retiring, or have a year with lower income, that may be the right time to take a larger distribution.

This is why the inherited IRA 10-year window is not just a compliance deadline. It is a 10-year tax planning opportunity.

What About Inherited Roth IRAs?

An inherited Roth IRA follows the same 10-year rule for non-spouse beneficiaries, but the tax treatment is very different.

Withdrawals from an inherited Roth IRA are generally tax-free since the original owner already paid taxes on the contributions. There are also no annual RMD requirements during the 10-year period, regardless of whether the original owner had started distributions, since Roth IRAs have no required minimum distributions during the owner's lifetime.

The one exception: if the Roth IRA was less than five years old at the time of the original owner's death, earnings on the account may be subject to income tax when withdrawn.

An inherited Roth is one of the most favorable assets to inherit. Letting it grow for as long as possible within that 10-year window before withdrawing can significantly increase what you ultimately receive, all tax-free.

Common Mistakes to Avoid

These are the errors that cost people the most with inherited IRAs.

Waiting until year ten to take everything. If annual RMDs are required because the original owner had started taking them, waiting until year ten is not an option. It will trigger penalties for every year you missed.

Rolling the account into your own IRA. Non-spouse beneficiaries cannot roll an inherited IRA into their own IRA. The account must remain titled as an inherited IRA in the original owner's name for your benefit.

Taking the entire balance in one year. Even when you are not required to take annual distributions, pulling everything at once in a single year can push you into a much higher tax bracket than spreading it out would.

Ignoring the account. Some people inherit an IRA and do not take any action, assuming no news is good news. If annual RMDs are required and you miss them, the penalty clock is already running.

Not verifying your beneficiary category. Whether you qualify as an Eligible Designated Beneficiary changes everything about your options. Do not assume you are subject to the 10-year rule without confirming first.

What to Do Right Now

If you have recently inherited an IRA, here are the steps to take.

First, find out when the original owner passed away and whether they had started taking RMDs. That single piece of information determines most of what you need to do.

Second, confirm how the account is titled. It must be in your name as beneficiary, not transferred directly into your own IRA.

Third, talk to a financial advisor and a CPA before taking any distributions. The decisions you make about timing and amounts have real, lasting tax consequences. Getting guidance early is worth far more than figuring it out later.

If you are just getting started with understanding your inheritance, What to Do in the First 30 Days After Inheriting Money is a good place to begin.

Frequently Asked Questions

What is the 10-year rule for inherited IRAs?
Most non-spouse beneficiaries who inherit an IRA from someone who passed away after December 31, 2019 must withdraw the entire account balance by December 31 of the 10th year following the year of death. Whether annual withdrawals are also required depends on whether the original owner had started taking RMDs.

Do I have to take money out of an inherited IRA every year?
It depends. If the original owner had not yet started Required Minimum Distributions, you can take withdrawals at any pace as long as the account is empty by year ten. If the original owner had started RMDs, you must take annual distributions in years one through nine and empty the account by year ten.

What happens if I miss an inherited IRA distribution?
Missing a required distribution carries a penalty of 25% of the amount you were supposed to withdraw. That penalty can be reduced to 10% if corrected within two years. The IRS issued penalty waivers for missed distributions from 2021 through 2024 while the rules were being finalized, but those waivers no longer apply.

Can I roll an inherited IRA into my own IRA?
Only if you are the surviving spouse. Non-spouse beneficiaries cannot roll an inherited IRA into their own IRA. The account must remain titled as an inherited IRA.

Is an inherited Roth IRA taxable?
Generally no. Withdrawals from an inherited Roth IRA are tax-free as long as the original owner's account was at least five years old. The 10-year distribution rule still applies, but you owe no income tax on qualified withdrawals.

What if I inherited an IRA before 2020?
Different rules apply. For IRAs inherited before January 1, 2020, the old stretch IRA rules may still be available depending on when the original owner passed and how distributions were structured. If you are in this situation, speak with a financial advisor to confirm what rules govern your account.

This Is One of the Most Consequential Financial Decisions You Will Make

The inherited IRA rules are complex, the penalties for getting them wrong are real, and the tax planning opportunities are significant. This is not an area to navigate alone.

At Intentional Wealth Partners, we help women understand their inherited IRA options and build a distribution strategy that fits their tax situation, their timeline, and their goals.