Inherited IRAs: The 10-Year Rule and Your Options

6 min read

Retirement Planning

Inheriting an IRA used to be simple: you could "stretch" required withdrawals over your own lifetime, letting the balance grow tax-deferred for decades. The SECURE Act changed all that. Now, most beneficiaries must empty the account within ten years — and the tax bill can be enormous if you don't plan.

The 10-Year Rule

For most non-spouse beneficiaries, the rule is blunt: the entire inherited IRA must be fully distributed by the end of the 10th year following the year of the original owner's death.

There are no annual RMDs for most beneficiaries — just the hard deadline. That flexibility is both a gift and a trap. You can let the account grow tax-deferred for nine years and withdraw everything in year ten, but doing so often pushes you into a higher tax bracket. Spreading the withdrawals across the ten years is usually smarter.

Who Still Gets the Stretch

A smaller group — eligible designated beneficiaries — can still stretch withdrawals over their own life expectancy:

A surviving spouse (who also has the option to treat the IRA as their own)
A minor child of the deceased (until they reach the age of majority, then the 10-year clock starts)
A disabled or chronically ill individual
Anyone not more than 10 years younger than the original owner (a sibling close in age, for example)

For everyone else — adult children, grandchildren, friends — the 10-year rule applies.

What Changes If the Owner Was Already Taking RMDs

If the original owner had already begun required minimum distributions (RMDs — generally required starting at age 73), then annual RMDs are required in years 1 through 9, with the entire remaining balance due by the end of year 10. This is a common point of confusion: the IRS finalized this "RMDs + 10-year deadline" interpretation in 2024 after years of waiving penalties. If the owner died before RMDs began, no annual RMDs are required — just the 10-year deadline.

The Tax Trap

Inherited traditional IRAs are funded with pre-tax dollars, so every distribution is taxed as ordinary income in the year you take it. Inherit a $500,000 IRA as a single filer in the middle of your career, and you can't avoid a significant tax hit — the only question is how to spread it.

Inherited Roth IRAs, by contrast, are tax-free if the account was open at least five years. But even Roth IRAs are still subject to the 10-year emptying requirement.

What To Do When You Inherit

Don't cash out the whole thing. A lump-sum distribution in year one maximizes your tax bill.
Identify the account type. Traditional vs. Roth changes everything. Also check whether the account was subject to RMDs.
Set up the inherited IRA properly. Title it as an inherited IRA (e.g., "John Smith, deceased, IRA for the benefit of Jane Smith"). Don't combine it with your own IRA.
Model the withdrawals. Spread them across years to stay out of higher brackets, or front-load in low-income years.
Check the beneficiary designations on your own accounts. The best inherited-IRA plan is the one you set up while you're alive.