Retirement Education Guide

Inherited IRA Rules & the 10-Year Rule: A Complete Guide for Beneficiaries

Inheriting a retirement account can be one of the most meaningful — and most tax-complicated — financial events of your life. Whether you’ve just inherited an IRA or you’re planning ahead so your own heirs are prepared, understanding the SECURE Act’s 10-year rule is essential.

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What You’ll Learn in This Guide

• ►  What the 10-year rule actually requires
• ►  Who is — and isn’t — subject to it
• ►  The critical difference between pre- and post-SECURE Act IRAs
• ►  How annual RMDs interact with the 10-year rule
• ►  Tax strategies for managing inherited IRA distributions
• ►  Special rules for surviving spouses
• ►  Florida-specific considerations for Treasure Coast retirees
• ►  Frequently asked questions

The Law That Changed Everything: SECURE Act & SECURE 2.0

Before December 20, 2019, most beneficiaries who inherited an IRA could stretch distributions over their own life expectancy — sometimes across decades. This “stretch IRA” strategy was a cornerstone of multi-generational wealth planning, allowing inherited retirement funds to continue growing tax-deferred for many years.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act, signed into law in late 2019, fundamentally rewrote the rules for most non-spouse beneficiaries. In its place came the 10-year rule: a requirement that, for most people who inherit an IRA from someone who died in 2020 or later, the entire account must be fully distributed — and taxes paid — within 10 years of the original account owner’s death.

Then came SECURE 2.0 (passed in December 2022), which made additional adjustments — including changes to required minimum distribution (RMD) ages — while leaving the 10-year rule largely intact. IRS clarifications issued in 2022 and 2023 added further complexity, particularly around whether annual RMDs are required within those 10 years.

If you’re a retiree on the Treasure Coast — in Martin County, St. Lucie County, Indian River County, or Palm Beach County — who recently inherited an IRA, or if you’re building an estate plan to protect your own heirs, this guide will walk you through every layer of the rules in plain language.

Who Must Follow the 10-Year Rule — and Who Gets a Pass

The SECURE Act created a tiered system. Your relationship to the deceased account owner determines which category you fall into, and that category determines your distribution timeline.

Eligible Designated Beneficiaries (EDBs) — Exempt from the 10-Year Rule

These individuals may still stretch distributions over their life expectancy, similar to the old rules:

• Surviving spouses — The most flexible category; they have multiple options (see the spouse section below).
• Minor children of the original owner — Only until they reach the age of majority (typically 21); at that point, the 10-year clock begins.
• Disabled individuals — As defined under IRS guidelines (Section 72(m)(7)).
• Chronically ill individuals — Also under specific IRS definitions.
• Beneficiaries not more than 10 years younger than the deceased — For example, a sibling close in age, or a friend.

Non-Eligible Designated Beneficiaries — Subject to the 10-Year Rule

This is the largest group of beneficiaries under current law. It includes:

• Adult children (and grandchildren) of the IRA owner
• Siblings who are more than 10 years younger than the deceased
• Any other individual who doesn’t qualify as an EDB

If an IRA is left to a non-person entity — a trust, an estate, or a charity — different rules apply and the analysis can become significantly more complex. This situation almost always warrants a conversation with both a tax professional and an estate planning attorney.

Inside the 10-Year Rule: What You Actually Have to Do

The 10-year rule is simple on its face: the entire inherited IRA must be fully distributed by December 31 of the year containing the 10th anniversary of the original owner’s death.

For example, if you inherit an IRA from a parent who died on March 15, 2023, the 10-year window closes on December 31, 2033. You don’t have to take equal amounts each year — you could theoretically take nothing in years one through nine and empty the account in year ten. However, as discussed below, this flexibility was significantly complicated by IRS guidance issued in 2022 and 2023.

If the original owner had not yet started RMDs (i.e., they died before their required beginning date), the current IRS position is that no annual RMDs are required during the 10-year period — but the full balance must still be gone by the end of year 10.

Pre-SECURE Act Inheritances: Different Rules Still Apply

The 10-year rule only applies to IRA owners who died on or after January 1, 2020. If you inherited an IRA from someone who died before that date, the old stretch IRA rules still apply — at least for now.

Under the pre-SECURE Act rules, non-spouse beneficiaries were required to begin taking annual RMDs based on their own single life expectancy, calculated using the IRS Single Life Expectancy Table. These RMDs had to begin by December 31 of the year following the original owner’s death.

If you are currently taking RMDs from a pre-2020 inherited IRA, it is critical that you continue to do so correctly. Failing to take a required distribution carries a penalty — currently 25% of the amount that should have been withdrawn (reduced to 10% if corrected in a timely manner under SECURE 2.0).

SECURE 2.0 also updated the life expectancy tables used to calculate RMDs, so if you’ve been managing a pre-SECURE Act inherited IRA for several years, it’s worth confirming your calculation methodology is current.

Special Rules for Surviving Spouses

Surviving spouses receive the most favorable treatment under both the old and new rules. If your spouse left you their IRA, you have several options — and choosing correctly can have significant long-term tax implications.

Option 1: Spousal Rollover (Treat It as Your Own)

You can roll the inherited IRA into your own IRA, treating it as if it were always yours. This resets the RMD clock to your own age and required beginning date. This is typically the most tax-efficient option for younger surviving spouses who don’t need the money immediately.

Option 2: Keep It as an Inherited IRA (Life Expectancy Distributions)

The surviving spouse can maintain the account as an inherited IRA and take RMDs based on their own life expectancy. Distributions don’t have to begin until the later of December 31 of the year following the owner’s death, or December 31 of the year the owner would have turned 73 (under current SECURE 2.0 rules).

Option 3: New Under SECURE 2.0 — Treat as Own IRA for RMD Purposes

Beginning in 2024, SECURE 2.0 introduced a new option allowing a surviving spouse who keeps the account as an inherited IRA to calculate RMDs using the deceased spouse’s applicable distribution period — which can be beneficial if the deceased was younger than the surviving spouse.

The right choice depends on your age, your income needs, your tax situation, and your other assets. There is no universal answer — this is exactly the type of decision worth discussing with a retirement-focused financial professional.

Tax Strategy Within the 10-Year Window

For non-spouse beneficiaries subject to the 10-year rule, the most common mistake is waiting too long. Taking the entire balance in year 10 might satisfy the letter of the law — but it could result in a massive tax bill in a single year, potentially pushing you into a much higher federal tax bracket.

A more thoughtful approach involves spreading distributions across the 10-year window in a way that levels out your taxable income. This might mean taking larger distributions in years when your income is otherwise lower, and smaller distributions in high-income years.

Key Tax Considerations for Florida Residents

Florida has no state income tax, which is a meaningful advantage for Treasure Coast retirees managing inherited IRA distributions. Unlike residents of states such as New York, California, or even neighboring Georgia, you won’t face a state-level income tax hit on inherited IRA withdrawals. However, federal income tax still applies in full, and the distributions count as ordinary income.

Distributions from an inherited IRA can also affect:

• Medicare Part B and D premiums — Higher income from IRA distributions can trigger IRMAA (Income-Related Monthly Adjustment Amount) surcharges, increasing your Medicare costs.
• Social Security taxation — Additional income can cause more of your Social Security benefit to become taxable (up to 85%).
• Net Investment Income Tax (NIIT) — If your income exceeds certain thresholds, an additional 3.8% tax may apply to investment income.

These interactions make the timing of inherited IRA distributions a multi-dimensional planning exercise — one that benefits from coordinated tax and financial planning.