Inherited IRA Withdrawal Rules: A Guide to the SECURE Act’s 10-Year Rule

Inherited IRA Withdrawal Rules: A Guide to the SECURE Act’s 10-Year Rule

Key Points – Inherited IRA Withdrawal Rules: A Guide to the SECURE Act’s 10-Year Rule

• Why the Clock Is Ticking for Many Inherited IRA Beneficiaries to Empty Their Accounts
• The End of the Stretch IRA Has Impacted Most Non-Spouse Beneficiaries
• Eligible Designated Beneficiaries, Non-Eligible Designated Beneficiaries, and Non-Designated Beneficiaries: Which One Are You and What Rules Do You Need to Follow?
• Annual RMDs May Also Be Required within the SECURE Act 10-Year Rule for Inherited IRAs
• What’s Your RMD Age?
• Penalties for Missed RMDs
• 10-Minute Read

The 10-Year Clock Is Ticking for Inherited IRA Distributions

How the SECURE Act Changed Inherited IRA Withdrawal Rules

Have you inherited an IRA since January 1, 2020? Prior to 2020, inheriting an IRA came with a simple, generous option. That was to stretch withdrawals over your own life expectancy, sometimes for decades, letting the account keep growing tax-deferred. For most beneficiaries, that is no longer an option following the passing of the SECURE Act.₁

After years of confusing guidance, the IRS finalized the rules for inherited IRAs in July 2024. Those rules took effect in 2025 and govern how anyone who inherits a traditional or Roth IRA must handle withdrawals. Understanding them matters because getting it wrong can mean a large, unexpected tax bill or an IRS penalty.

Inherited IRA Withdrawal Rules and the SECURE Act’s 10-Year Rule Matters Beyond the Numbers: Why Planning Matters

For many people, an inherited IRA doesn’t arrive as an abstract financial planning exercise. It arrives in the middle of grief, often while sorting through a parent’s or spouse’s belongings, closing out their affairs, and adjusting to life without them. The account represents years of careful saving by someone who wanted to leave something behind for the people they loved.

That context is exactly why the 10-year rule deserves attention rather than avoidance. If you inherited an IRA in 2020 or 2021, that 10-year clock to empty the account is already more than halfway up! Take note of Figure 1. Plan for Required Minimum Distributions accordingly before the 10-year clock feels like it starts to tick faster.

FIGURE 1 – The SECURE Act 10-Year Rule for Inherited IRAs

A missed RMD, a withdrawal taken in the wrong year, or a lump sum pulled out at the worst possible tax moment doesn’t just cost money; it can quietly erode the very gift the original owner worked so hard to build, at a time when the beneficiary is least equipped to absorb the loss.

Grieving families already have enough to manage without an unnecessary IRS penalty compounding the difficulty. Taking the time to understand these rules, or asking a professional for help, is one concrete way beneficiaries can honor that legacy and make sure it reaches them intact.

The Impact of Tax Planning and Estate Planning

The compressed 10-year timeline creates real tax planning decisions, particularly for beneficiaries who inherit large traditional IRA balances. A few strategies commonly come up in practice.

Spreading withdrawals across the full 10 years, rather than waiting until year 10 to withdraw everything, can help avoid pushing a single year’s income into a much higher tax bracket. This is especially relevant for beneficiaries in their peak earning years who inherit from a parent.

Timing withdrawals around lower-income years, such as a sabbatical, a job transition, or early retirement before Social Security begins, may reduce the overall tax cost of distributions since the beneficiary controls the pace within years one through nine (when no mandatory annual RMD applies) or must at least meet the minimum in years where RMDs are mandatory.

Coordinating with the original owner’s estate plan matters too. Account owners who want to ease their heirs’ tax burden increasingly consider Roth conversions during their own lifetime, since converted funds passed to heirs avoid the annual RMD requirement inside the 10-year window and come out tax-free.

Multiple beneficiaries splitting one inherited account into separate inherited IRAs by the deadline (generally December 31 of the year following the owner’s death) allows each beneficiary to manage withdrawals according to their own tax situation, rather than being bound to a single schedule.

The End of Stretch IRA

Before 2020, most IRA beneficiaries could take RMDs based on their own life expectancy. A 30-year-old who inherited an IRA from a parent could spread withdrawals over roughly 50 years, minimizing the tax hit each year and letting the bulk of the account continue compounding.

The SECURE Act, effective for deaths on or after January 1, 2020, eliminated this stretch option for most non-spouse beneficiaries. In its place, Congress created the 10-year rule. The inherited account must be fully emptied by December 31 of the 10th year following the original owner’s death. There is no requirement to spread distributions evenly across those 10 years, but the entire balance must be withdrawn by the deadline.₂

This is a significant change in tax exposure. Someone who inherits a $500,000 traditional IRA no longer has 50 years to draw it down gradually. They have 10, which can push withdrawals into higher tax brackets, especially if the beneficiary is still working and has other income.

Who Is Exempt: Eligible Designated Beneficiaries

The 10-year rule does not apply to everyone. The SECURE Act carved out a category called “eligible designated beneficiaries” (EDBs), who can still use the life-expectancy stretch method. EDBs include:

• Surviving spouses, who have the most flexibility of any beneficiary category, can roll the inherited IRA into their own account.
• Minor children of the original account owner, but only until they reach the age of majority (age 21 in most states). Once they age out, the 10-year clock starts and the account must be emptied within 10 years from that point, not from the original owner’s death.
• Individuals who are disabled, as defined under Internal Revenue Code Section 72(m)(7), with the disability determination tied to the original owner’s date of death.
• Individuals who are chronically ill, as defined under Section 7702B(c)(2), generally meaning they are unable to perform at least two of six activities of daily living, or require substantial supervision due to a cognitive impairment, for an expected period of at least 90 days.
• Any other beneficiary who is not more than 10 years younger than the original account owner. This provision often applies to siblings or close-in-age partners.

Everyone else, including most adult children and grandchildren, falls into the “non-eligible designated beneficiary” category and is subject to the 10-year rule.

The RMD Wrinkle Inside the SECURE Act 10-Year Window

For several years after the SECURE Act passed, there was genuine uncertainty over a critical question. Within that 10-year window, do beneficiaries also have to take annual RMDs, or can they simply wait and empty the account in year 10?

The IRS’s proposed regulations in 2022 surprised many practitioners by suggesting that annual RMDs were required in years one through nine whenever the original owner had already begun taking their own RMDs before death. That interpretation was inconsistent with how many advisors and taxpayers had read the statute. It created a real risk that people who had skipped distributions in 2021 and 2022 would owe penalties.

In response, the IRS issued a series of notices waiving the RMD requirement and the associated penalty for the 2021 through 2024 tax years, while it worked out final regulations. That waiver period is why so many beneficiaries were able to skip annual withdrawals in the early 2020s without penalty, even though the underlying law was ambiguous.

What’s Your Required Beginning Date for RMDs?

The IRS finalized the regulations on July 18, 2024, confirming the interpretation from the proposed rules, and the requirements took full effect starting January 1, 2025.₃ The final rule turns on one factor: had the original owner reached their required beginning date (RBD), the date lifetime RMDs must start, before they died?

If the Owner Died Before Their Required Beginning Date…

The beneficiary does not need to take annual RMDs during years one through nine. They can withdraw nothing for years, take irregular withdrawals, or empty the account all at once in year 10. The only firm requirement is that the balance reaches zero by December 31 of the 10th year.

If the Owner Died on or After Their Required Beginning Date…

The beneficiary must take annual RMDs in years one through nine, calculated using the beneficiary’s own single life expectancy factor from IRS tables, and then withdraw whatever remains by the end of year 10. Skipping a required annual distribution in this scenario can now trigger a penalty, since the transition relief has ended.

The required beginning date itself has moved in recent years. SECURE 2.0 raised it to age 73 for people who reach that age between 2023 and 2032, and it will rise again to 75 starting in 2033.₄ That means whether a beneficiary owes annual RMDs during the 10-year window depends not just on whether the owner had started taking distributions, but on the specific age thresholds in effect at the time of death.

Roth IRAs Work Differently

Inherited Roth IRAs are still subject to the 10-year rule, but the annual RMD requirement inside that window does not apply, regardless of the original owner’s age at death. That’s because Roth IRA owners are never required to take lifetime RMDs, so under the statute they are always treated as having died before their required beginning date. A beneficiary of an inherited Roth IRA can therefore let the account grow untouched for nine years and withdraw everything in year 10, without any annual withdrawal obligation.

Because qualified Roth distributions are tax-free (assuming the original account was opened at least five years before the withdrawal), many beneficiaries choose to delay withdrawals as long as possible to maximize tax-free growth, then take a lump sum at the end of the period.

Penalties for Missing a Required Distribution

Under SECURE 2.0, the excise tax for failing to take a RMD dropped from 50% of the shortfall to 25%.₅ That penalty can be reduced further, to 10%, if the beneficiary corrects the missed distribution within a defined correction window and files IRS Form 5329.

The correction window generally runs until the earliest of three dates:

• The date the IRS mails a notice of deficiency for the excise tax.
• The date the IRS assesses the tax.
• Last day of the second tax year following the year the shortfall occurred.

In practical terms, this gives most people roughly two years from the year a distribution was missed to catch the error, withdraw the shortfall, and file the correction paperwork before facing the full 25% penalty.

Given how recently the 2025 enforcement date arrived, beneficiaries who inherited traditional IRAs from owners who had already started RMDs should confirm with a tax professional whether they owe a distribution this year, since the years of automatic penalty relief have ended.

Spousal Beneficiaries Have More Options

Surviving spouses remain the most flexible category of beneficiary. In addition to being treated as eligible designated beneficiaries with stretch options, a spouse can also elect to treat an inherited IRA as their own, rolling it into an existing or new IRA in their own name. This resets RMD calculations to the surviving spouse’s own age and required beginning date, and it allows the spouse to name their own beneficiaries going forward. Alternatively, a spouse can remain a beneficiary of the inherited account. That can make sense if the spouse is younger than 59½ and might need penalty-free access to the funds before that age. Inherited IRA withdrawals are not subject to the 10% early withdrawal penalty regardless of the beneficiary’s age.₆

Inherited IRA Withdrawal Rules and the SECURE Act 10-Year Rule FAQs

What Is the SECURE Act 10-Year Rule for Inherited IRAs?

The 10-year rule requires most non-spouse beneficiaries to withdraw the entire balance of an inherited IRA by December 31 of the 10th year following the original owner’s death. It replaced the old “stretch IRA,” which had let beneficiaries spread withdrawals over their own life expectancy. Depending on whether the original owner had already started their own RMDs before death, the beneficiary may also need to take annual withdrawals during years one through nine, not just a lump sum at the end.

When Did the SECURE Act 10-Year Rule Start for Inherited IRAs?

The 10-year rule was created by the SECURE Act. It applies to owners who died on or after January 1, 2020. Accounts inherited before that date generally keep the older stretch rules. The annual RMD requirement inside the 10-year window was contested for several years. The IRS waived it for 2021 through 2024 while final regulations were pending, then made it fully effective starting January 1, 2025, after finalizing the rules on July 19, 2024.

Does the SECURE Act 10-Year Rule Apply to a Spousal Inherited IRA?

Not in the same way it applies to most other beneficiaries. A surviving spouse is an eligible designated beneficiary and can choose to stretch distributions over their own life expectancy instead of using the 10-year rule. Spouses also have an option unavailable to anyone else. They can roll the inherited IRA into their own IRA and follow the RMD rules that apply to their own age, rather than remaining a beneficiary at all.

Does the SECURE Act 10-Year Rule Apply to an Inherited Roth IRA?

Yes, the account still must be emptied within 10 years of the original owner’s death. However, because Roth IRA owners never have lifetime RMDs, beneficiaries of an inherited Roth IRA are not required to take annual withdrawals during years one through nine, regardless of the original owner’s age at death. They only need to withdraw the full remaining balance by the end of year 10. Qualified withdrawals are also generally tax-free, provided the original account was at least five years old.

How Does the SECURE Act 10-Year Rule Work for Inherited IRAs?

The account must reach a zero balance by December 31 of the 10th year after the original owner’s death. Within that window, the beneficiary’s obligations depend on whether the original owner had reached their required beginning date (the age at which lifetime RMDs must start, currently 73 for most people) before dying. If the owner died before that date, the beneficiary may withdraw funds on any schedule within the 10 years. If the owner died on or after that date, the beneficiary must take an annual RMD in years one through nine, based on their own life expectancy, and withdraw the rest by year 10.

How Do You Calculate an RMD for an Inherited IRA?

For beneficiaries who owe annual RMDs during the 10-year window, or for eligible designated beneficiaries using the lifetime stretch, the calculation is the same basic formula: divide the account’s balance as of December 31 of the prior year by a life expectancy factor from the IRS’s Single Life Expectancy Table (Table I in IRS Publication 590-B).₇ The beneficiary looks up their life expectancy factor once, based on their age in the year after the owner’s death, and then reduces that factor by 1.0 each subsequent year rather than looking up a new age-based factor annually. For example, a beneficiary with a $750,000 balance and a factor of 25.4 would owe an RMD of about $29,528 that year ($750,000 ÷ 25.4).

The Bottom Line with Inherited IRA Withdrawal Rules and the SECURE Act 10-Year Rule

The rules governing inherited IRAs are more layered than they first appear. The 10-year rule is the headline change from the SECURE Act. Whether annual withdrawals are also required during that window depends on the original owner’s age at death and their required beginning date, whether the beneficiary qualifies as an eligible designated beneficiary, and whether the account is a traditional or Roth IRA.

With the IRS’s final regulations now in force as of 2025 and the earlier penalty relief no longer available, beneficiaries who inherited traditional IRAs from owners already taking RMDs need to make sure they’re taking the required annual distribution this year and each year through year nine, or file Form 5329 promptly if they’ve fallen behind.

Inherited IRA Withdrawal Rules Can Be Complicated: We’re Here to Help

Don’t let guesswork become a factor when it comes to wealth transfer. Given how much money can be at stake and how the rules interact with a beneficiary’s own tax situation, working with a connected team of professionals that includes a tax advisor and estate planning professional can help build confidence as you make important withdrawal decisions.

At Modern Wealth, our advisors are supported by specialists in tax, estate, investments, and insurance to help them build connected financial plans that are tailored to each client’s respective goals. If you’re unsure how to navigate the complexities of the inherited IRA withdrawals rules and how they’ve changed due to the SECURE Act’s 10-year rule, know that you’re not alone.

The grief that comes with losing a loved one is already a lot to process before even thinking about wealth transfer. Our team is here to help guide you through those difficult withdrawal decisions so that you feel confident as the 10-year clock winds down rather than taking on more stress.

Don’t wait another second to take control of your financial life. Get started today and connect with our team by completing your Modern Confidence Score. It’s our team’s goal to help you enjoy today with confidence for tomorrow.

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Resources Mentioned in This Article

[1] U.S. Congress – Public Law 116-94—Dec. 20, 2019

[2] IRS – Retirement Topics: Beneficiary

[3] IRS – Treasury, IRS issue updated guidance on required minimum distributions from IRAs, other retirement plans; generally retains proposed rules

[4] U.S. Senate – SECURE Act 2.0 of 2022

[5] IRS – Correcting Required Minimum Distribution Failures

[6, 7] IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs)

Investment advisory services offered through Modern Wealth Management, LLC, a registered investment adviser.

The views expressed represent the opinion of Modern Wealth Management, LLC, a registered investment adviser. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.