Inherited retirement accounts and the 10-year rule
Before 2020, a child who inherited an IRA could “stretch” withdrawals over their own life expectancy — decades of continued tax-deferred growth. The SECURE Act ended that. For deaths in 2020 and later, most non-spouse beneficiaries must empty the inherited account by December 31 of the tenth year after the year of death. How you spread withdrawals across that window is now one of the biggest tax decisions an heir makes.
Who the 10-year rule hits
The rule applies to most “designated beneficiaries” — typically adult children and other individual heirs. A short list of “eligible designated beneficiaries” can still stretch: surviving spouses (who can also just treat the account as their own), the owner’s minor children until they reach 21, disabled or chronically ill beneficiaries, and anyone not more than ten years younger than the deceased. Everyone else is on the 10-year clock, for both inherited traditional and inherited Roth accounts.
The years-1-through-9 nuance
“Empty it within ten years” sounds like you could simply wait and take one lump sum in year ten. Sometimes you can — but not always. Under the IRS final regulations issued in 2024, if the original owner died on or after their required beginning date for RMDs (age 73 for those born 1951–1959, 75 for those born 1960 or later), the heir must also take annual required minimum distributions in years one through nine, based on the heir’s life expectancy, with the balance due in year ten. The IRS waived penalties for missed heir RMDs from 2021 through 2024 while the rules were being finalized; they apply from 2025 onward. Inherited Roth IRAs never trigger the annual-RMD requirement — the owner had no required beginning date — so a Roth heir can genuinely wait until year ten while the money grows tax-free.
No Roth conversion escape hatch
A tempting idea — “I’ll just convert the inherited IRA to a Roth and stop the clock” — does not work. A non-spouse beneficiary cannot roll an inherited IRA into their own IRA or convert it to a Roth; the only moves allowed are trustee-to-trustee transfers into another inherited account and distributions. Every dollar in an inherited traditional IRA is coming out as ordinary income within the window, full stop. (One consolation: inherited-account distributions carry no 10% early-withdrawal penalty, whatever the heir’s age.)
Bracket-aware draining
Since the income is unavoidable, the game is choosing when it lands. Draining a $500,000 inherited IRA as one year-ten lump can shove an heir several tax brackets higher — and, if the heir is near Medicare age, into IRMAA surcharge territory two years later. Spreading withdrawals evenly keeps each year’s slice smaller; smarter still is filling a target tax bracket each year, taking more in the heir’s low-income years (a sabbatical, early retirement) and less in peak-earning years. Waiting has a real appeal for Roth heirs and low-bracket futures; even withdrawals suit heirs already in a stable middle bracket.
The schedule also has to coexist with the rest of your tax plan. Inherited-IRA income stacks on top of your own Roth conversions, capital gains, and eventually your own RMDs, and it feeds the same MAGI that prices ACA subsidies before 65 and Medicare premiums after. An heir mid-way through a conversion ladder may want to pause conversions and let inherited-IRA withdrawals fill those brackets instead — the deadline dollars should generally claim the cheap bracket space first.
Try it in Deorbit Plan
The Inheritances panel models all of this. Add an expected (or already-received) inheritance, mark it as an inherited traditional IRA/401(k) or inherited Roth, and pick a drain schedule: spread evenly over 10 years, wait and drain in year 10, lump sum in year 1, or fill a tax bracket each year (coordinated with your own Roth conversions). The “Original owner had started RMDs” toggle enforces the years-1–9 minimum distributions, and accounts inherited in past years keep their original 10-year deadline. Distributions flow through the simulator’s full tax engine, so you can watch the bracket and IRMAA consequences of each schedule.
Educational content only — not financial, tax, or investment advice.
Read this article in the interactive simulator →