If you inherited an IRA, the “10-year rule” can feel like a landmine. You are grieving, paperwork is flying around, and suddenly you are supposed to understand IRS rules that can trigger a big tax bill if you guess wrong.
Here is the simple version: many non-spouse beneficiaries must empty an inherited IRA by the end of the 10th year after the account owner died. That is the 10-year rule. The hard part is figuring out whether you also need to take annual withdrawals along the way, and whether you qualify for an exception.
What the 10-year rule is
The 10-year rule is a distribution rule created by the SECURE Act. It generally applies when you inherit an IRA from someone who died in 2020 or later.
If the 10-year rule applies to you, you typically must withdraw all money from the inherited IRA by December 31 of the year that contains the 10th anniversary of the owner’s death.
Example: If the IRA owner died in 2021, the inherited IRA generally must be fully emptied by December 31, 2031.
What the 10-year rule does not mean
- It does not automatically mean “take 10 equal payments.” You can take withdrawals in any pattern, as long as you follow the rules that apply to your situation.
- It does not mean you have 10 years to “do nothing” in every case. Depending on the details, you may have annual required withdrawals too.
Who the 10-year rule applies to
In most cases, the 10-year rule applies to most non-spouse beneficiaries who inherit an IRA from someone who died in 2020 or later.
This commonly includes:
- Adult children (and most other adult relatives)
- Friends
- Many trusts (special rules apply, and not every trust qualifies)
If you are a surviving spouse, you often have more flexible options that can bypass the 10-year rule entirely, depending on what you choose.
Important nuance: If an IRA is payable to the decedent’s estate (not a person or qualifying trust), the estate is generally a non-designated beneficiary and is not under the 10-year rule. Different payout rules typically apply instead (often the 5-year rule if the owner died before their required beginning date, or the decedent’s remaining life expectancy rule if they died on or after it).
Big exceptions: Eligible beneficiaries
The IRS carves out a group called Eligible Designated Beneficiaries (EDBs). If you qualify as an EDB, you may be able to take distributions based on life expectancy (often called “stretch” distributions), rather than being forced into the 10-year window right away.
EDBs generally include:
- Surviving spouses
- Minor children of the account owner (but only until they reach age 21, then the 10-year rule typically starts)
- Disabled individuals (as defined under IRS rules)
- Chronically ill individuals (as defined under IRS rules)
- Individuals not more than 10 years younger than the IRA owner (often a sibling or a close-in-age partner)
Two quick notes that trip people up:
- A minor grandchild is usually not treated the same as a minor child of the account owner for this exception.
- If you qualify as an EDB and use life expectancy payouts, the rules can change again if you later die and someone inherits what is left.
Do you need yearly withdrawals?
This is the part that causes the most confusion, and it is also the part that can create penalties if you assume wrong.
Here is the clean rule of thumb that matches how the post-SECURE Act rules are generally being applied under current IRS regulations:
Inherited IRA 10-year rule of thumb
- Owner died before their required beginning date (RBD): typically no annual RMDs are required. You still must empty the account by the end of year 10.
- Owner died on or after their RBD: annual RMDs are generally required in years 1 through 9, and you still must empty the account by the end of year 10.
What is the RBD? It is the point when the original owner was required to start RMDs (the exact starting age varies by birth year under current law).
Important caveat: IRS guidance has evolved since the SECURE Act, and there have been transition periods and penalty relief for some years and situations. So use the rule of thumb to plan, but confirm your specific inherited IRA’s annual requirement for the current year with the custodian and, if the balance is meaningful or the case is complex, a tax pro.
If you want an even simpler decision tree:
- Was the original owner already taking RMDs? If yes, plan on annual beneficiary RMDs plus the year-10 emptying deadline.
- If no, you may be able to choose your own withdrawal pattern, as long as the account is empty by the deadline.
How taxes work
If you inherited a Traditional IRA
Most withdrawals are taxed as ordinary income in the year you take them. That means pulling out a large amount in one year can push you into a higher tax bracket.
If you inherited a Roth IRA
Roth withdrawals are often tax-free, but only if they are qualified. In plain English, that typically hinges on whether the Roth has met the 5-year holding rule (and other qualification rules). The 10-year emptying deadline can still apply even when no tax is due.
Marcus-style rule of thumb: Traditional inherited IRA decisions are often about tax bracket management. Roth inherited IRA decisions are often about maximizing tax-free growth while meeting the deadline.
Smart ways to use the window
There is no one perfect strategy, but here are approaches that work well for a lot of Smart Cent Guide readers.
1) Spread withdrawals to manage your tax bracket
If it is a Traditional inherited IRA, consider taking distributions over multiple years instead of one giant withdrawal that creates a tax spike.
2) Match withdrawals to lower-income years
Any year you earn less, change jobs, take unpaid leave, or retire early can be a great time to withdraw more from a Traditional inherited IRA at a lower marginal rate.
3) Let a Roth inherited IRA grow, then withdraw late (if allowed)
If your Roth withdrawals are qualified and you are not required to take annual distributions, many people choose to wait and withdraw closer to the end of the 10-year period to keep more money compounding tax-free longer.
4) Set aside money for taxes as you withdraw
If you withdraw from a Traditional inherited IRA, consider earmarking part of each distribution in a high-yield savings account so tax time does not become a surprise crisis.
Step-by-step: Find your rule
If you only do one thing after reading this article, do this checklist.
- Find the year of death. If the owner died in 2020 or later, the SECURE Act rules are likely in play.
- Identify your beneficiary type: spouse, eligible designated beneficiary, designated beneficiary, or estate/trust.
- Ask whether the owner had started RMDs before death (your custodian can usually tell you).
- Confirm your deadline year for the 10-year rule (if it applies).
- Confirm whether annual distributions are required for your account type and situation.
- Create a withdrawal plan that considers taxes, your income, and any annual requirements.
- Automate it if possible so you do not miss a required distribution.
Quick add-on if there are multiple beneficiaries: Ask your custodian whether separate inherited IRA accounts should be set up for each beneficiary. In some cases, properly splitting accounts by the applicable deadline can affect how distributions are calculated and administered.
Quick add-on if a trust is involved: Trust-owned inherited IRA rules can change depending on trust design (for example, conduit vs accumulation style provisions). If a trust is listed as beneficiary, it is worth a quick call with the estate attorney or a tax pro before you take distributions.
Mistakes to avoid
- Missing the deadline. Failing to empty the account on time can trigger steep IRS penalties.
- Missing an annual RMD. If annual RMDs apply and you skip one, you can face an excise tax. Under current rules, the penalty is generally 25% of the shortfall, and it may be reduced to 10% if you correct it in time.
- Rolling it into your own IRA when you are not a spouse. Non-spouse beneficiaries generally cannot treat an inherited IRA as their own.
- Taking a huge taxable withdrawal by accident. Especially common when someone cashes out quickly to “simplify.”
- Ignoring state taxes. Your state may tax IRA distributions differently than federal rules.
- Not retitling the account correctly. Inherited IRAs need specific titling so the IRS sees it as an inherited account.
Quick FAQs
When does the 10-year clock start?
It starts after the year the account owner died. Practically, most people focus on the end date: December 31 of year 10.
Can I take nothing for 9 years and then withdraw everything?
Sometimes, but not always. If the owner died on or after their RBD, annual RMDs are generally required in years 1 through 9. Confirm your requirement for your exact situation and year.
What if I inherited only a small IRA?
Even small accounts have to follow the rules. The difference is that your “best” strategy may simply be the one that is easiest and avoids penalties.
Does the 10-year rule apply to inherited 401(k)s?
Similar concepts can apply to employer plans, but inherited 401(k) rules can vary by plan and may offer different distribution options. Many beneficiaries roll inherited employer-plan assets into an inherited IRA to simplify, when allowed.
My bottom line
The 10-year rule is not meant to punish you, but it can absolutely punish your wallet if you miss a requirement or accidentally stack withdrawals into one high-tax year.
If you want the cleanest next step: call the custodian, confirm whether annual distributions are required for your inherited IRA, then map out a simple year-by-year withdrawal plan that fits your tax bracket and your life.
Friendly reminder: This article is educational and not individualized tax advice. Inherited IRA rules can hinge on small details, so if the balance is significant or your situation is unusual (trust beneficiary, multiple beneficiaries, disability or chronically ill status), it is worth a quick consult with a tax professional.