The SECURE Act (P.L. 116-94), enacted December 20, 2019, eliminated the "stretch IRA" for most non-spouse beneficiaries, replacing it with a mandatory 10-year distribution window under IRC §401(a)(9)(H). For many beneficiaries, this meant an end to decades of tax-deferred growth that had been available under prior law. The IRS finalized the implementing regulations (T.D. 10001) on July 19, 2024, confirming that when the deceased account owner had already reached their Required Beginning Date, annual RMDs are required in years 1 through 9 — not just a lump-sum depletion at year 10. The four-year penalty waiver series covering 2021 through 2024 has definitively ended; beginning with the 2025 tax year, missed annual RMDs trigger a 25% excise tax under IRC §4974.
What Is the 10-Year Rule for Inherited IRAs?
IRC §401(a)(9)(H), added by the SECURE Act, requires most non-spouse beneficiaries who inherit an IRA from an account owner who died after December 31, 2019, to fully deplete the account by December 31 of the 10th calendar year following the owner's year of death. An IRA inherited in 2021 must be fully distributed by December 31, 2031; one inherited in 2022, by December 31, 2032.
The rule applies to the account balance as a whole. There is no prescribed annual distribution formula under the 10-year rule standing alone — a beneficiary may withdraw $1 in year one and the full remaining balance in year ten. The exception is critical: if the deceased account owner died on or after their Required Beginning Date, annual RMDs are also required in each of years 1 through 9. The IRS confirmed this interpretation in the July 2024 final regulations, ending years of practitioner ambiguity that followed the SECURE Act's enactment.
The 10-year rule applies to both traditional and Roth inherited IRAs, though the annual RMD obligation works differently for each (see below).
Who Must Follow the 10-Year Rule?
IRC §401(a)(9)(E) divides all beneficiaries into two categories based on eligibility for the prior stretch-IRA treatment:
One classification note: a minor child EDB status applies only to the account owner's own biological or adopted minor child, not grandchildren. Once the minor child reaches age 21, EDB status ends and the 10-year clock begins on the remaining balance at that point.
Non-designated beneficiaries — estates, charities, and trusts that do not qualify as "see-through" trusts — are subject to different rules entirely: the five-year rule (if the owner died before the RBD) or the ghost life expectancy rule (if the owner died after the RBD).
Do Inherited IRA Beneficiaries Have to Take Annual RMDs Before Year 10?
Whether annual distributions are required within the 10-year window depends entirely on the owner's age relative to their Required Beginning Date at death.
Required Beginning Date by Birth Year
RBD RulesThe Required Beginning Date (RBD) is April 1 of the year following the year the IRA owner reached their applicable RMD age. SECURE 2.0 Section 107 phased in a higher RMD age based on birth year:
If the owner died before their RBD (or owned a Roth IRA, which has no RBD): NEDBs must deplete the account within 10 years but face no annual distribution requirement. A beneficiary can take nothing in years 1–9 and distribute the full balance on December 31 of year 10.
If the owner died on or after their RBD: NEDBs must take annual RMDs in each of years 1 through 9. Each year's RMD equals the prior December 31 account balance divided by the beneficiary's applicable life expectancy factor from IRS Single Life Expectancy Table I (Publication 590-B), reduced by 1 for each subsequent year. The entire remaining balance — however large — must also be distributed by December 31 of year 10.
The IRS issued Notices 2022-53, 2023-54, and 2024-35 waiving the annual RMD penalty for tax years 2021 through 2024 while the regulations were being finalized. Those waivers are now exhausted. The final regulations in T.D. 10001 apply to RMDs for calendar years beginning on or after January 1, 2025, with no further relief indicated.
An important clarification: the waiver period did not pause the 10-year clock. A beneficiary who inherited an IRA in 2020 and took no distributions from 2021 through 2024 (relying on the waivers) still faces a December 31, 2030 final depletion deadline. The waivers only suspended the annual RMD formula requirement and its associated penalty — they did not extend the 10-year window.
What Is the Penalty for a Missed Inherited IRA RMD?
IRC §4974 Excise Tax on Missed RMDs
PenaltiesSECURE 2.0 Section 302 reduced the excise tax on missed RMDs, effective for tax years beginning after December 29, 2022:
The excise tax is reported on Form 5329, Part IX (Lines 52–55), filed with the federal income tax return for the year in which the RMD was required but not taken. Taxpayers who wish to request a reasonable cause waiver should still file Form 5329, enter "RC" and the waived amount in the margin of the applicable line, and attach a statement. Filing Form 5329 — even without paying the tax — starts the statute of limitations running, which protects the taxpayer from open-ended IRS examination.
A $200,000 inherited IRA with a required 2025 annual RMD of $14,000 that goes undistributed generates a $3,500 excise tax at the 25% rate, or $1,400 if corrected within the two-year window. On top of the excise tax, the beneficiary still owes income tax on the missed distribution when it is eventually taken.
What Are the Inherited IRA Rules for Roth IRAs?
Because Roth IRA owners are never required to take distributions during their lifetime (IRC §408A(c)(5)), a Roth IRA has no Required Beginning Date. For inherited Roth IRA purposes, the account owner is always treated as having died before the RBD — regardless of the owner's actual age at death.
The practical consequence:
- The 10-year rule still applies to NEDBs who inherit a Roth IRA from an owner who died after December 31, 2019. The account must be fully depleted by December 31 of the 10th year after death.
- No annual RMDs are required within the 10-year window. The beneficiary may take any amount in any year, or nothing in years 1–9 and the full balance in year 10.
- Distributions are generally income-tax-free, provided the Roth IRA has satisfied the 5-year holding period (measured from January 1 of the first year the original owner made any Roth IRA contribution).
Inheriting a Roth IRA from a decedent who died before the 5-year period elapsed changes the analysis: earnings on the inherited Roth IRA are taxable until the 5-year period is satisfied. Basis (contributed amounts) is always returned tax-free.
For high-income beneficiaries in the 32% to 37% bracket, the inherited Roth IRA's 10-year tax-free compounding and distribution flexibility is a significant planning tool. Deferring distributions within the 10-year window maximizes the continued tax-free growth.
What Options Does a Surviving Spouse Have?
A surviving spouse has more flexibility than any other beneficiary category. Three distinct strategies are available:
Spousal Rollover — Treat as Own IRA
The surviving spouse rolls the inherited IRA into their own IRA (or simply retitles the account in their own name). RMDs do not begin until the surviving spouse reaches their own RBD — age 73 or 75 depending on birth year. New beneficiaries can be named. Key limitation: If the surviving spouse is under age 59½, distributions before that age trigger the 10% early withdrawal penalty under IRC §72(t), because the account is now the spouse's "own" IRA rather than an inherited one.
Keep as Inherited IRA — EDB Stretch
The surviving spouse maintains the account as an inherited IRA and takes annual distributions over their own single life expectancy. No 10% early withdrawal penalty applies to distributions from an inherited IRA, regardless of the beneficiary's age. RMDs must begin by December 31 of the year following the owner's death — or, if the owner had not yet reached their RBD, the surviving spouse may delay until the year the owner would have reached that age.
SECURE 2.0 Section 327 Spousal Election
Effective January 1, 2024 under SECURE 2.0, a surviving spouse who is the sole beneficiary may elect to be treated as the deceased owner for RMD purposes. The RMD start date is tied to when the deceased spouse would have reached their RBD — potentially allowing significant deferral if the deceased died young. Unlike the rollover, this election avoids the early withdrawal penalty for spouses under 59½. RMDs, when they begin, are calculated using the surviving spouse's own age and the Uniform Lifetime Table.
The right choice depends on the surviving spouse's age, income needs, and the age differential between spouses. A younger surviving spouse whose deceased partner died in their 50s generally benefits most from the SECURE 2.0 Section 327 election, which defers RMDs while avoiding early withdrawal penalties — a result previously unavailable without the spousal rollover.
How Should Beneficiaries Manage Distributions Over the 10-Year Window?
For inherited traditional IRAs where no annual RMD formula applies (decedent died before RBD), the 10-year window creates genuine tax planning flexibility.
Spread Distributions Across Low-Income Years
Each distribution from an inherited traditional IRA is ordinary income in the year received. Taking larger distributions in years when other taxable income is lower — between jobs, before pension or Social Security begins, in early retirement — can keep each distribution in lower marginal brackets. A beneficiary who receives $400,000 in an inherited IRA and plans to retire in year 4 might take minimal distributions in years 1–3 (while still earning income) and larger distributions in years 4–9 (at lower marginal rates), with any remainder distributed in year 10.
Avoid the Year-10 Income Spike
A common mistake is to defer all distributions and take the entire inherited IRA balance in year 10. For a $500,000 inherited IRA, a year-10 lump-sum distribution adds $500,000 of ordinary income to the beneficiary's return in a single year, potentially pushing them into the 37% bracket and triggering additional Medicare surcharges (IRMAA) and Net Investment Income Tax (NIIT) under IRC §1411. Distributing ratably — even without an annual RMD requirement — is usually more tax-efficient.
Note: Rollovers to a Roth IRA Are Not Permitted
Non-spouse beneficiaries cannot roll over an inherited traditional IRA into their own Roth IRA. IRC §408(d)(3)(C) prohibits rollovers from inherited IRAs except by a surviving spouse. The beneficiary must distribute the inherited IRA and pay ordinary income tax on all distributions; they may then contribute the after-tax proceeds to their own Roth IRA up to the annual contribution limits ($7,500 for 2026 if under 50; $8,000 if 50 or older), subject to income limits and earned income requirements. This is an important distinction: inheriting a traditional IRA does not create a shortcut to tax-free Roth status.
How Does the Five-Year Rule Apply to Estates and Non-Designated Beneficiaries?
When an IRA passes to a non-designated beneficiary — an estate, charity, or trust that does not qualify as a "see-through" trust — the 10-year rule does not apply. Instead:
- Owner died before RBD: The five-year rule applies under IRC §401(a)(9)(B)(ii). The entire account must be distributed by December 31 of the fifth year following the owner's year of death. No annual distributions are required within that window.
- Owner died on or after RBD: The "ghost life expectancy" rule applies. Annual distributions must continue at least as rapidly as the deceased owner was required to take them, using the owner's remaining single life expectancy from Table I reduced by 1 for each subsequent year. This rule prevents large balances from accumulating indefinitely in estates and certain trusts.
For estate and trust planning, proper beneficiary designation is one of the most consequential decisions an IRA owner makes. Naming an individual beneficiary — even multiple individual beneficiaries under a per stirpes designation — generally produces better outcomes than letting the IRA pass through an estate, which typically forfeits the stretch or 10-year flexibility in favor of the five-year rule.
What Are the Most Common Inherited IRA Mistakes to Avoid in 2026?
Several errors are especially costly under the current rules:
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Assuming no annual RMD is required. If the deceased died after their RBD, annual distributions are mandatory in years 1–9. Many beneficiaries incorrectly interpret the 10-year rule as permitting total deferral regardless of circumstances.
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Missing the year-of-death RMD. If the account owner died before taking their own required RMD for the year of death, the beneficiary is responsible for completing that distribution by December 31 of the year of death. Failure triggers the 25% excise tax on that shortfall.
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Aggregating inherited IRA RMDs with personal IRA RMDs. RMDs from inherited IRAs cannot be satisfied by distributions from the beneficiary's own traditional IRAs, and vice versa. Each inherited IRA is a separate account for RMD calculation purposes, and distributions must be taken from the appropriate account.
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Failing to correctly identify the beneficiary category. A beneficiary who mistakenly believes they qualify as an EDB (for example, assuming they are within 10 years of the deceased) and takes stretch distributions instead of 10-year distributions may face accumulated penalties when the error is discovered.
For individual tax planning involving inherited retirement accounts, particularly where the decedent was already in RMD status, professional guidance early in the administration process can prevent costly errors that compound over the 10-year window.
Have questions about inherited IRA rules or how to structure distributions from an account you've inherited? Contact TS CPA for a free consultation. We respond within the same day.