inherited accounts and the 10-year rule

In short

A friend of mine lost her father last spring, and the first thing she asked me was whether she owed the government a big check right away. She did not. If you have inherited a retirement account from someone other than a spouse, the clock probably runs ten years, not ten days. The account must usually be emptied by the end of the tenth year after the owner died. Whether you must also take money out each year depends on whether the owner had already started required withdrawals. Talk to the plan or the account custodian first, and a tax professional second, before you move a dollar. Take your time, but do not let the deadline drift past you.

The whole of it

What it is

I once watched a neighbor open an envelope about his late aunt's IRA and stare at it like it was written in another language. It is not that hard. When an account owner dies, the account passes to a named beneficiary. For most grown children, grandchildren, and friends, the SECURE Act of 2019 set the ten year rule. The beneficiary has to empty the account by December 31 of the tenth year after the owner's death.

The rule covers traditional IRAs, Roth IRAs, 401(k) plans, and similar accounts. Some beneficiaries get more room. The IRS calls them eligible designated beneficiaries. They include a surviving spouse, a minor child of the owner, a disabled or chronically ill person, and someone not more than ten years younger than the owner. Those people can often stretch withdrawals over their own life expectancy instead.

A spouse has extra choices too. A surviving spouse can often treat the account as their own. That is a different path from the one described here, so check which door applies to you.

How it works

You have probably wondered what the government actually wants from you in those ten years. The honest answer depends on one fact. Had the owner already reached the age when required minimum distributions begin? That age is set by law and has changed over the years, so the current figure is 73 for 2024 (source, checked 9/27/2026).

If the owner died before that point, the beneficiary has no yearly minimum. The only requirement is that the account be empty by the end of year ten. Some people wait and take it all at the end. Others spread it out. Both are allowed.

If the owner died on or after that point, the rule is stricter. The IRS final regulations say the beneficiary must take a yearly withdrawal in years one through nine. Then the whole balance must go by the end of year ten. Miss a yearly withdrawal and a penalty can apply. The penalty rate is set by law, and the current figure is the current figure, which the official source publishes each year.

Tax works differently by account type. Money pulled from an inherited traditional account counts as ordinary income in the year it comes out. A big withdrawal can push a person into a higher tax bracket. Money from an inherited Roth is usually tax free if the Roth was open long enough. Even so, the ten year emptying rule still applies to a Roth.

One more point trips people up. The owner's own final year matters. If the owner had not yet taken the required withdrawal for the year of death, the beneficiary has to take it. IRS Publication 590-B explains this, and it is worth reading.

The numbers, and where to find yours

If you are holding a statement and wondering which figures matter, there are only a few. First is the date of death, because the ten years start counting from the year after it. Second is the account balance on that date. Third is your own tax bracket, which depends on your other income each year.

The official figures live in a few places. The IRS publishes Publication 590-B, called Distributions from Individual Retirement Arrangements, which covers inherited IRAs. The IRS also posts the Uniform Lifetime Table and the Single Life Table there. The beneficiary can read the yearly dollar limits and ages on IRS.gov. The account custodian, such as the bank or brokerage, can tell you the balance and the date of death value. The plan administrator can answer for a 401(k). Ask for both in writing.

The current catch up and contribution limits do not apply to inherited accounts, because a nonspouse beneficiary cannot add money to them. That is a common surprise. You can only take money out.

A worked example

A woman named Denise, age 45, inherited her father's traditional IRA. He died in 2024 at age 80. He had already been taking required withdrawals, so the stricter rule applies to her. The account held $200,000 on the date of death. Suppose it earns nothing, just to keep the arithmetic clean.

Her father had one required withdrawal left for the year he died. Say the custodian worked out that amount as $8,000. Denise takes it by the end of that year. That leaves $192,000 in the account.

Now she has until the end of 2034 to empty it. Years one through nine each need a withdrawal. The yearly amount comes from her own life expectancy factor. Suppose the IRS table gives a factor of 39.6 for her age in the first year. The factor drops by one each year after that, so the next year uses 38.6.

Year one is $192,000 divided by 39.6, which is $4,848. Her balance falls to $187,152. Year two is $187,152 divided by 38.6, which is $4,848 again. The factor falls as the balance falls, so the amounts stay close to even for a while. Her yearly withdrawals stay near $4,848 for years one through nine.

After nine years of those withdrawals, about $148,000 is left. The whole remaining balance must come out in year ten. Take $148,000 in one year on top of her $70,000 salary, and her taxable income jumps to $218,000. That can land her in a much higher bracket than she sees today.

Here is what Denise might do instead. She can take extra in the earlier years, say $20,000 a year on top of the required amount, while her bracket is lower. Over ten years, $20,000 times 10 is $200,000 pulled out in smaller slices. No single year carries a giant bill. That is a choice, not a rule, and she should run the numbers with a tax professional first.

Where it goes wrong

A fellow I know missed a yearly withdrawal because nobody told him it was required. Don't let that be you. The most common slip is assuming the ten year rule means wait until year ten. For an owner who had already started required withdrawals, that is wrong. The yearly withdrawals are mandatory, and the penalty applies for each one missed.

Another slip is moving the money the wrong way. A nonspouse beneficiary cannot roll an inherited IRA into their own IRA. The account must be retitled as an inherited IRA, with the deceased owner's name still on it. If a non spouse beneficiary tries to roll an inherited traditional IRA into an IRA of their own, the IRS treats the move as a distribution, and the whole balance becomes taxable income that year. Ask the custodian to do a direct transfer.

Some people forget the deadline for naming a beneficiary form. Whoever is listed on the form usually controls what happens, even over a will. An old form naming an ex spouse has caused real heartache. The plan follows the form, not the family's wishes.

The last trap is the bracket jump. Taking everything in year ten is allowed. It can also cost far more in tax than spreading the withdrawals out. No harm in planning early.

Questions to answer before you leave this page

Do you know the exact date the owner died, and did the owner reach the age for required withdrawals before then? Are you a spouse, a minor child, a disabled person, or someone close in age, any of which might give you a longer stretch? Has the custodian retitled the account as an inherited IRA, and did the money move by direct transfer? Do you know whether this is a traditional or a Roth account, and what that means for your tax bill? Have you checked whether a withdrawal was still owed for the year of death? And what will your income look like over the next ten years, so you can pick the years when taking more money out costs you the least?