Inherited IRA rules — 10-year rule

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If you’ve recently inherited a retirement account from a loved one, understanding the inherited IRA rules should be one of your first priorities. The SECURE Act of 2019 — and its follow-up legislation, SECURE 2.0 — fundamentally changed how most beneficiaries must handle inherited retirement accounts, introducing the so-called “10-year rule” that catches many Florida retirees and pre-retirees completely off guard. Whether you’ve inherited an IRA from a parent, spouse, or sibling, these rules determine how quickly you must withdraw the funds, how much you’ll owe in taxes, and what planning strategies are still available to you. Getting this wrong can be an expensive mistake — so let’s walk through it together, step by step.

For a comprehensive look at everything covered in this post, you can also visit our Inherited IRA rules — 10-year rule — Complete Guide on the 1715 Podcast website, which goes even deeper into beneficiary planning strategies tailored for Treasure Coast families.

What Changed with the SECURE Act

Before 2020, most non-spouse beneficiaries who inherited an IRA had the luxury of something known as the “stretch IRA.” This strategy allowed beneficiaries to take required minimum distributions (RMDs) based on their own life expectancy, effectively “stretching” the tax-deferred growth of the account over decades. A 45-year-old who inherited a $400,000 IRA from a parent could take relatively small distributions each year, letting the bulk of the account continue to grow. That flexibility gave families a meaningful tool for multi-generational wealth transfer and tax efficiency. The inherited IRA rules as they existed before 2020 were, in many ways, a gift to beneficiaries.

The SECURE Act — which stands for Setting Every Community Up for Retirement Enhancement — changed all of that when it took effect on January 1, 2020. Congress eliminated the stretch IRA for most non-spouse beneficiaries, replacing it with the 10-year rule. Under this new framework, most people who inherit an IRA from someone who died in 2020 or later must fully drain the account within 10 years of the original account holder’s death. There are no required annual distributions during years one through nine — just a hard deadline to empty the account by the end of year ten. That sounds simple enough, but the tax implications can be far from simple.

The IRS added another layer of complexity in 2022 when it issued proposed regulations clarifying that the inherited IRA rules under the 10-year rule may also require annual RMDs during years one through nine — but only when the original account owner had already reached their required beginning date (RBD) for RMDs before they died. The IRS subsequently waived penalties for missed RMDs in 2021 through 2024 while beneficiaries and advisors sorted through the confusion, but those waivers are expected to phase out. Understanding these nuances is critical before you make any distribution decisions.

Who Is Affected by the 10-Year Rule

Not every beneficiary falls under the same version of the inherited IRA rules, so one of the first things you need to determine is which category of beneficiary you are. The law creates two broad groups: “eligible designated beneficiaries” (EDBs) who retain special treatment, and everyone else who falls under the 10-year rule. If you inherited an IRA from someone who died before January 1, 2020, the old stretch rules still apply to you — the new law only affects accounts inherited from decedents who died on or after that date. For the majority of adults who’ve inherited accounts from parents or other non-spouse family members in recent years, however, the 10-year rule almost certainly applies.

The general category of non-eligible designated beneficiaries — those subject to the 10-year rule — includes adult children (even those who are completely financially dependent), siblings, nieces, nephews, friends, and most trusts. This is a large group that covers a significant portion of people currently navigating the inherited IRA rules for the first time. It’s also worth noting that this rule applies across IRA types: traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs are all covered, though the tax treatment differs based on whether the original contributions were pre-tax or after-tax. Inherited 401(k)s and other employer-sponsored plans follow similar rules, though some plan-specific nuances may apply.

Inherited IRA Rules Explained: How the 10-Year Rule Works

At its core, the 10-year rule under the current inherited IRA rules is straightforward: the entire inherited account must be fully distributed by December 31 of the tenth year following the year of the original owner’s death. For example, if your mother passed away on March 15, 2023, you would have until December 31, 2033 to fully distribute the inherited IRA. During that window, you can take out as much or as little as you want in any given year — there is no mandated annual withdrawal schedule, assuming the deceased had not yet reached their required beginning date for RMDs. That flexibility is actually one of the most important planning opportunities available under the current rules.

However, if the original owner had already started taking RMDs before they died — meaning they had reached their required beginning date — the inherited IRA rules become more complex. In that scenario, you are generally required to continue taking annual distributions based on your own single life expectancy during years one through nine, and then fully distribute whatever remains by the end of year ten. The IRS’s required beginning date is currently April 1 of the year following the year in which the account owner turns 73 (a change implemented by SECURE 2.0 that is scheduled to increase to age 75 by 2033). For detailed guidance on current RMD ages and rules, the IRS’s official RMD resource page is an authoritative starting point.

One frequently overlooked aspect of the inherited IRA rules involves Roth IRAs. When you inherit a Roth IRA, the 10-year rule still applies — you must empty the account within 10 years — but the distributions are generally tax-free, as long as the original Roth IRA had been open for at least five years. This creates a meaningful difference in planning. With a traditional inherited IRA, every dollar you withdraw is taxed as ordinary income, meaning larger withdrawals in higher-income years can push you into a higher tax bracket. With an inherited Roth IRA, you have the flexibility to let the account grow tax-free for as long as possible and take a large lump-sum distribution in year ten with no income tax consequence. Understanding this distinction can lead to very different distribution strategies depending on what type of account you inherited.

Eligible Designated Beneficiaries: The Exceptions You Need to Know

The SECURE Act preserved the stretch IRA strategy for a specific group of beneficiaries known as eligible designated beneficiaries (EDBs). These are individuals for whom Congress recognized that an abrupt 10-year liquidation would create genuine hardship or inequity. Knowing whether you qualify as an EDB is essential, because the inherited IRA rules for this group are significantly more favorable. EDBs are permitted to take distributions over their own life expectancy, much as beneficiaries could before the SECURE Act, which can dramatically reduce the annual tax burden from an inherited account.

The five categories of eligible designated beneficiaries are: (1) surviving spouses, (2) minor children of the original account owner (but only until they reach the age of majority, at which point the 10-year rule kicks in), (3) disabled individuals who meet the IRS definition of disability, (4) chronically ill individuals, and (5) beneficiaries who are not more than 10 years younger than the deceased. That last category is particularly useful for siblings who may be close in age, or a beneficiary who was a younger spouse. A surviving spouse actually has even more options — they can treat the inherited IRA as their own, roll it into their own IRA, or elect to be treated as a beneficiary — making spousal inheritance one of the more flexible situations under the current inherited IRA rules. If you believe you may qualify as an EDB, it’s important to work with a qualified financial professional to ensure you elect the correct treatment from the start, because some elections cannot be undone.

Tax Planning Strategies Under the New Inherited IRA Rules

One of the most powerful aspects of the 10-year rule is the distribution flexibility it provides for non-EDB beneficiaries — and that flexibility is where thoughtful tax planning can make a real difference. Because you’re not required to take a fixed annual amount (assuming the original owner hadn’t yet reached their RBD), you can strategically time your withdrawals to minimize your overall tax bill. The goal for most people is to avoid “bunching” large taxable withdrawals into years when their income is already high, and instead front-load or smooth out distributions during years when they expect lower income. The inherited IRA rules don’t force your hand on timing — they just set the final deadline.

For retirees on the Treasure Coast who may have a mix of Social Security income, pension income, and investment income, layering in inherited IRA distributions requires careful coordination. Larger distributions in certain years could increase the portion of your Social Security benefits that are taxable, trigger Medicare premium surcharges known as IRMAA (Income-Related Monthly Adjustment Amounts), or push you into a higher capital gains tax bracket. These ripple effects mean that the inherited IRA rules aren’t just about the account itself — they affect your entire financial picture. The Social Security Administration provides helpful guidance on how income affects benefits at SSA.gov, and Medicare premium information is available at Medicare.gov.

Another strategy worth considering is a partial Roth conversion within your own accounts — separate from the inherited IRA — to “fill up” lower tax brackets in years when your inherited IRA distributions are modest. For example, if you’re in the 22% federal bracket and have room before hitting the 24% threshold, converting some of your own traditional IRA funds to Roth during low-distribution years from the inherited account could reduce your future tax burden. This kind of layered thinking is where comprehensive financial planning around the inherited IRA rules pays dividends for years to come. The team at The 1715 Podcast and its affiliated financial planning resources regularly explores these types of strategies for Treasure Coast families navigating retirement income planning.

Common Mistakes Beneficiaries Make

Even well-intentioned beneficiaries stumble when navigating the inherited IRA rules for the first time. One of the most common mistakes is failing to take any distributions for years and then facing a massive, fully taxable withdrawal in year ten that dramatically increases that year’s tax liability. The flexibility built into the 10-year rule is only an advantage if you use it proactively. Beneficiaries who ignore the account for nine years and then receive a forced lump-sum distribution of $300,000 or more in a single tax year can find themselves in the highest federal tax bracket for that year — sometimes pushing into 32%, 35%, or even 37% territory. This is precisely the scenario that careful planning around the inherited IRA rules is designed to avoid.

Another common mistake is rolling an inherited IRA into your own personal IRA — which is generally only permitted for surviving spouses. Non-spouse beneficiaries who attempt this will trigger an immediate fully taxable distribution of the entire account, along with potential early withdrawal penalties if they’re under age 59½. The funds must be held in a properly titled inherited IRA (sometimes called a beneficiary IRA), titled in a specific format such as “[Deceased Owner’s Name], deceased, IRA, for the benefit of [Beneficiary Name].” Custodians have different procedures for establishing these accounts, so working with your financial institution carefully and promptly — ideally within 60 days of the original owner’s death — is essential to preserving the account’s tax-deferred status under the inherited IRA rules.

What This Means for Treasure Coast Retirees

For retirees and pre-retirees in Stuart, Port St. Lucie, Vero Beach, and across the Treasure Coast, the inherited IRA rules have real and personal implications — both for those who have already inherited accounts and for those who are planning their own estates. Florida is an income-tax-free state, which is a meaningful advantage: inherited IRA distributions are subject to federal income tax but not state income tax for Florida residents. That’s a genuine benefit compared to retirees in states like New York or California, where state income taxes can add 6–13% on top of federal rates. Understanding this distinction helps Florida beneficiaries model their net-of-tax distributions more accurately.

From an estate planning perspective, Treasure Coast residents who are building a legacy for their own children and grandchildren should be aware that the old strategy of naming a young grandchild as an IRA beneficiary to stretch distributions over 60+ years is largely gone under the current inherited IRA rules. A minor grandchild has EDB status only until they reach the age of majority — at which point they have 10 years to empty the remaining balance. That’s still a meaningful benefit compared to the adult-child 10-year rule, but it’s far less powerful than the stretch strategies that were available before 2020. Charitable remainder trusts, Roth conversions during your own lifetime, and careful beneficiary designations are now among the most important tools available for IRA estate planning in the current environment.

Next Steps and Resources

If you’ve recently inherited an IRA or are planning your estate with an eye toward what your beneficiaries will face, the most important first step is to understand exactly which category applies to your situation and what the applicable inherited IRA rules require of you. Start by confirming the date of the original owner’s death, whether they had reached their required beginning date for RMDs, and what type of IRA was inherited. These three facts will determine your distribution requirements and your planning options. From there, mapping out a year-by-year distribution strategy that aligns with your income picture — Social Security, pensions, investment income, and any other sources — is the foundation of a sound plan.

Working through the inherited IRA rules on your own is possible, but it’s easy to miss nuances that can cost thousands of dollars in unnecessary taxes. A fee-based financial planner or CPA who specializes in retirement income planning can help you model different distribution scenarios and make informed decisions. On The 1715 Podcast, we regularly discuss these kinds of retirement planning topics in plain language, designed specifically for Treasure Coast families who want to make the most of what they’ve worked and saved for. We’d love for you to tune in, and if you’re ready to talk through your specific situation with a financial professional, we encourage you to reach out and schedule a consultation — there’s no obligation, and a single conversation can often provide tremendous clarity.

The inherited IRA rules may seem daunting at first, but with the right information and a thoughtful plan, most beneficiaries can navigate them successfully and minimize unnecessary tax drag. The 10-year rule changed the landscape significantly, but it also created a real planning opportunity for those who take advantage of the flexibility it provides. Don’t wait until year nine to start thinking about this — the earlier you build a strategy, the more options you’ll have.

This content is for educational purposes only and does not constitute investment advice. Past performance is not indicative of future results. Please consult a qualified financial professional before making any financial decisions.

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