Inherited IRAs and the ten year rule

How it works

A surviving spouse can treat the account as their own or keep it as an inherited account. Most other heirs of a person who died after 2019 fall under the ten year rule: the whole account has to be withdrawn by December 31 of the tenth year after the year of death. When the original owner had already reached their required distribution start age, the heir also has to take yearly minimum distributions in years one through nine, under rules the IRS finalized. A minor child of the owner, a disabled or chronically ill person, and someone no more than ten years younger than the owner are eligible designated beneficiaries who can stretch withdrawals over their own life expectancy. An inherited Roth IRA follows the ten year rule with tax free withdrawals.

What it gives

A spouse keeps every option, including treating the account as their own and delaying distributions.

Ten years gives room to spread taxable withdrawals across several tax years.

An inherited Roth comes out tax free, so the ten year rule costs the heir only the lost growth.

What it costs, or where the catch is

A large pretax account inherited during an heir's peak earning years is taxed at high rates no matter how it is spread.

When yearly minimums apply, a missed one carries the same excise tax as any other required distribution.

A nonspouse heir cannot combine the account with their own IRA or roll it to a new custodian except by direct transfer.

A worked example

Nikhil, age 45, inherits a $200,000 traditional IRA from his aunt, who died at 80. He is under the ten year rule with yearly minimums, since she had started distributions. Withdrawing about $20,000 a year keeps each year's taxable income lower; at a 24 percent rate the tax is about $4,800 a year, roughly $48,000 over ten years. Taking all $200,000 in year ten would push much of it into the 32 and 35 percent brackets, and the tax would be well above $48,000.

Where it goes wrong

The common miss is letting an inherited account sit untouched for nine years, then taking the whole balance in year ten in a single high bracket, or missing the yearly minimums where they apply.

Who confirms it for you

For your own numbers, a CPA or enrolled agent. This page explains how the rule works for people in general; it does not know your situation and does not tell you what to do.

The official source

IRS: Retirement topics, beneficiary. Every figure that changes by year comes from the site's rules table, which the watcher checks against the official page on a schedule; where a figure is not yet verified, this page says so instead of printing a number.