Inheriting an IRA used to be straightforward: spread distributions over your lifetime, keep most of the money growing tax-deferred for decades. That strategy — the "stretch IRA" — is largely gone for most people. The SECURE Act of 2019 replaced it with a 10-year rule that can trigger a massive tax bill if you don't plan carefully. Here's what the new rules mean for you.
- The Old Rules vs. The New Rules
- Who Gets to Stretch (Eligible Designated Beneficiaries)
- The 10-Year Rule: How It Actually Works
- The Tax Problem With the 10-Year Rule
- Inherited Roth IRA: Same 10-Year Rule, Better Tax Treatment
- Surviving Spouse Options
- How Beneficiary Designations Connect
- Frequently Asked Questions
The Old Rules vs. The New Rules
| Pre-SECURE Act (Before 2020) | Post-SECURE Act (2020 and after) | |
|---|---|---|
| Withdrawal timeline | Over beneficiary's lifetime | 10 years for most non-spouse heirs |
| Annual RMDs required? | Yes, annually | Depends (see below) |
| Tax deferral period | Decades possible | Maximum 10 years |
| Who benefits from stretch? | All designated beneficiaries | Eligible Designated Beneficiaries only |
Who Gets to Stretch (Eligible Designated Beneficiaries)
The SECURE Act created a protected class called Eligible Designated Beneficiaries (EDBs) who can still stretch distributions over their lifetime instead of taking everything within 10 years. EDBs include:
- Surviving spouse: Most flexibility — can roll the inherited IRA into their own IRA and treat it as their own, delaying RMDs to their own age 73
- Minor children of the deceased owner (not grandchildren): Can stretch until reaching the age of majority (18 in most states), then the 10-year clock starts
- Disabled individuals: IRS definition applies — substantial gainful activity threshold
- Chronically ill individuals: Must meet specific IRS criteria
- Beneficiaries not more than 10 years younger than the original owner: A sibling or friend close in age may qualify
Everyone else — adult children, grandchildren, non-spouse partners, trusts that don't qualify — must follow the 10-year rule.
The 10-Year Rule: How It Actually Works
If you're a non-Eligible Designated Beneficiary, the rule is: the entire inherited IRA must be empty by December 31 of the 10th year after the original owner's death. Year of death doesn't count — the clock starts the following year.
Whether you must take annual distributions within those 10 years depends on whether the original owner had already started their Required Minimum Distributions:
| Scenario | Annual RMDs Required? | Full Depletion Deadline |
|---|---|---|
| Owner died before RMD age (before 73) | No — take at any pace | By end of year 10 |
| Owner died on or after RMD age (73+) | Yes — annual RMDs required | By end of year 10 |
Note: IRS finalized these rules in 2024 after years of uncertainty. If you inherited an IRA between 2020 and 2023 and didn't take RMDs because of the confusion, the IRS waived penalties for those years — but 2025 forward, annual distributions are required if applicable.
The Tax Problem With the 10-Year Rule
Traditional IRA distributions are taxed as ordinary income in the year you take them. If you inherit a $400,000 IRA and dump it all in year 10, that's $400,000 of taxable income in one year — potentially pushing you into the 37% bracket when you would have otherwise been in the 22% bracket.
The smarter approach for most people is spreading distributions evenly across all 10 years. $400,000 ÷ 10 = $40,000/year. Depending on your other income, that might all land in the 22% bracket instead of creating a spike that hits 32% or 37%.
Model your income for each of the 10 years. If you have a low-income year (job loss, parental leave, early retirement), that's the time to take larger distributions from the inherited IRA while staying in a lower bracket.
Inherited Roth IRA: Same 10-Year Rule, Better Tax Treatment
The 10-year rule applies to inherited Roth IRAs too. The difference: Roth IRA distributions are tax-free (assuming the account was held for at least 5 years). So with an inherited Roth, you're forced to take money out within 10 years, but it doesn't cost you in taxes.
This creates interesting planning opportunities: if you don't need the money in years 1–9, you can let it grow tax-free and take the entire balance in year 10 with zero tax consequences. With a traditional inherited IRA, that strategy creates a massive tax bill. With a Roth, it's just free money.
Surviving Spouse Options
If you're inheriting from a spouse, you have the most flexibility of any beneficiary:
- Rollover to your own IRA: Most common. The inherited IRA becomes yours. Your own RMD age applies (73). You can name new beneficiaries.
- Inherited IRA (keep as-is): Useful if you're under 59½ and need to access the money before your own IRA could be accessed without penalty. Inherited IRA distributions are not subject to the 10% early withdrawal penalty.
Most financial planners recommend rolling it over into your own IRA once you're past 59½ — it gives maximum flexibility and delays RMDs to your own age 73.
How Beneficiary Designations Connect
Who you name as IRA beneficiary directly determines which rules apply. A properly named spouse gets maximum stretch flexibility. An adult child gets 10 years. Keeping beneficiary designations current isn't just administrative — it determines how your heirs will be taxed.
For context on the documents that control your estate more broadly, see the estate planning basics guide. And for the rules that apply while you're still alive — specifically when you're forced to take withdrawals from your own accounts — see the RMD guide.
Frequently Asked Questions
What is the 10-year rule for inherited IRAs?
The 10-year rule requires most non-spouse IRA beneficiaries to completely withdraw all assets from an inherited IRA by December 31 of the 10th year following the original owner's death. The rule was established by the SECURE Act of 2019 and replaced the previous "stretch IRA" strategy that allowed distributions over a beneficiary's lifetime. If the original owner had already started RMDs, the beneficiary must also take annual RMDs during the 10 years.
Can a surviving spouse avoid the 10-year rule on an inherited IRA?
Yes. A surviving spouse is an Eligible Designated Beneficiary and is not subject to the 10-year rule. The most common strategy is to roll the inherited IRA into the spouse's own IRA, where standard RMD rules (starting at age 73) apply. Alternatively, the spouse can keep it as an inherited IRA to access funds before age 59½ without the 10% early withdrawal penalty — useful if the surviving spouse is younger.
Is an inherited Roth IRA subject to the 10-year rule?
Yes, inherited Roth IRAs are subject to the same 10-year rule as traditional inherited IRAs for non-spouse beneficiaries. The key difference is that Roth IRA distributions are tax-free (assuming the account was held at least 5 years), so the 10-year forced withdrawal timeline doesn't create a tax burden. You can let the money grow tax-free for all 10 years and take a lump sum at the end with no income tax consequences.
Related: beneficiary designation mistakes to avoid, required minimum distributions explained, estate planning documents you need.
