10 Year Rule Inherited IRA

The Rule That Replaced the Stretch IRA

Before 2020, a non-spouse beneficiary who inherited an IRA could stretch distributions across their entire life expectancy — a 35-year-old inheriting from a parent might spread withdrawals over 50 years, keeping the annual tax hit small while the account continued growing tax-deferred.

The SECURE Act of 2019 eliminated that for most non-spouse beneficiaries. In its place: a hard 10-year depletion deadline. Every dollar must leave the inherited IRA by December 31 of the year containing the 10th anniversary of the original owner's death.

The SECURE 2.0 Act of 2022 added further complexity, and the IRS didn't publish final regulations until July 2024. Three years of confusion means many beneficiaries still don't understand whether they need annual withdrawals during those 10 years or can wait until the end.

Who the 10-Year Rule Applies To

The 10-year rule applies to designated beneficiaries — named individuals on the beneficiary form who don't qualify for one of the exceptions.

The exceptions are narrow. Only Eligible Designated Beneficiaries (EDBs) can still use the old life-expectancy stretch method:

• Surviving spouses
• Disabled individuals (as defined by IRC Section 72(m)(7))
• Chronically ill individuals
• Minor children of the deceased (under age 21 — not grandchildren)
• Individuals not more than 10 years younger than the deceased

Everyone else who inherited an IRA on or after January 1, 2020 — adult children, grandchildren, nieces, nephews, siblings, friends — falls under the 10-year rule.

One critical nuance for minor children: the stretch applies only until they turn 21. At that point, the 10-year clock starts. An 18-year-old who inherits gets the stretch until 21, then must empty the account by December 31 of the year containing the 10th anniversary of that date.

The Annual RMD Question: It Depends on When the Owner Died

This is where the IRS regulations finally settled a debate that lasted from 2020 to 2024.

If the original owner died before their Required Beginning Date (age 73 for people born 1951–1959, age 75 for those born in 1960 or later, and earlier for prior cohorts): No annual RMDs are required during the 10-year window. You can withdraw nothing for nine years and take the entire balance in year 10 if you choose. The only hard deadline is full depletion by the end of year 10.

If the original owner died on or after their RBD: You must take annual life-expectancy-based RMDs in years one through nine. Whatever remains must come out in year 10. These annual RMDs use the longer of your single life expectancy and the owner's remaining life expectancy under the IRS Single Life Table, with the applicable factor decreasing by 1.0 each subsequent year.

The IRS waived penalties for missed annual RMDs during the 10-year window for tax years 2021 through 2024 while the final regulations were pending. That relief expired December 31, 2024. Starting with the 2025 tax year, annual RMDs are enforceable with the standard 25% excise tax on undistributed amounts.

Why Waiting Until Year 10 Is Usually a Bad Idea

Even when no annual RMDs are required (owner died before RBD), taking the entire balance in the final year concentrates all the taxable income into a single tax return. On a $500,000 inherited IRA, that could push a beneficiary into the 35% or 37% federal bracket — costing $50,000 or more in unnecessary taxes compared to a spread-out approach.

A more effective strategy: distribute roughly equal amounts each year, or time larger withdrawals in years when your other income is lower (a sabbatical year, between jobs, or before Social Security begins).

Some beneficiaries coordinate inherited IRA withdrawals with their own Roth IRA contributions — using the inherited distributions to replace income they're diverting to Roth contributions, effectively converting the tax character of their overall retirement savings.

How the 10-Year Rule Works With Roth IRAs

Inherited Roth IRAs are also subject to the 10-year depletion requirement for non-EDB beneficiaries. The difference: Roth distributions are generally tax-free (assuming the original Roth met the 5-year holding requirement).

For inherited Roth IRAs, the 10-year rule still applies, but the urgency is lower because there's no tax hit on distributions. The optimal strategy is typically to leave the money in the account as long as possible — let it grow tax-free for the full 10 years, then withdraw at the deadline.

Annual RMDs during the 10-year window follow the same before-RBD / after-RBD logic, but since Roth IRA owners are never required to take RMDs during their lifetime, the owner's RBD is effectively never reached. This means inherited Roth IRAs never trigger annual RMDs within the 10-year window — only the year-10 deadline applies.

What Happens If You Miss the Deadline

Failing to empty the account by the end of year 10 triggers a 25% excise tax on the amount that should have been distributed. On a $200,000 remaining balance, that's a $50,000 penalty — in addition to the ordinary income tax owed on the distribution itself.

The SECURE 2.0 Act added a correction mechanism: if you fix the shortfall within two years and file Form 5329, the penalty drops to 10%. Still a $20,000 hit on that same balance.

Missing annual RMDs in years one through nine (when required) triggers the same penalties on each year's shortfall. Multiple missed years compound quickly.

Practical Steps for Beneficiaries Under the 10-Year Rule

First, determine whether the original owner had reached their Required Beginning Date. The custodian should be able to tell you the owner's date of birth, which is all you need — the RBD is generally April 1 of the year after the applicable starting age: 73 for people born 1951–1959, 75 for those born in 1960 or later, and an earlier age for prior cohorts.

Second, request a date-of-death valuation statement. This establishes the baseline for any year-of-death RMD and your own annual calculations.

Third, work with a CPA to model distributions across the full 10-year window. The goal is to equalize taxable income across years, keeping as much as possible out of the highest brackets.

The Retirement Account Claims toolkit includes a 10-year distribution planner alongside document checklists and custodian scripts for the entire claim process — from initial notification through final-year depletion.