Inherited IRAs and the 10-year rule

When you inherit a traditional IRA or 401(k), you also inherit its tax bill. Every dollar you withdraw is taxable income to you, at your own rates. The rules on how fast you must withdraw changed for deaths from 2020 on. For most adult children and other heirs, the account must now be emptied within 10 years.

How you spread those withdrawals over the 10 years can change the total tax by tens of thousands of dollars. This guide explains the rules, who's exempt, and how to plan the withdrawals.

Which rule applies to you

It depends on who you are in relation to the person who died, the original owner.

Eligible designated beneficiaries

These beneficiaries can still take withdrawals over their own life expectancy, the old "stretch":

• the owner's surviving spouse
• the owner's minor child, until the child reaches majority, after which the 10-year rule starts
• a beneficiary who is disabled or chronically ill
• a beneficiary not more than 10 years younger than the owner, such as a sibling close in age

A surviving spouse has extra choices. The main one is treating the IRA as their own, or rolling it into their own IRA. Then the spouse's own required minimum distribution age applies.

Everyone else named as a beneficiary

Other individuals, including most adult children and grandchildren, fall under the 10-year rule. The whole account must be withdrawn by December 31 of the 10th year after the year of death.

Whether you also need withdrawals in years 1 through 9 depends on the owner's age at death:

• The owner died before their required beginning date: no yearly withdrawals are required. You can take money out whenever you like within the 10 years.
• The owner died on or after their required beginning date: you must take a required distribution in each of years 1 through 9. Then you empty the account in year 10.

The required beginning date is April 1 of the year after the owner reached their RMD age. For people born from 1951 through 1958, that age is 73.

Estates, charities and some trusts

If the beneficiary isn't a person, such as an estate, other rules apply. They can be faster. Some trusts can be treated as if the trust's beneficiaries were named directly. A trust needs careful drafting to get that treatment.

How the yearly amount is figured

For years 1 through 9, the required amount is last year's December 31 balance divided by a life expectancy factor. You look up the factor in the IRS Single Life Table for your age in the year after the death. Each later year, you subtract one from it.

Eligible designated beneficiaries use the same method for their life-expectancy payments.

A worked example

Maya is single and earns $120,000 a year. She was 51 when her father died in 2025 at 80, past his required beginning date. She inherits his $500,000 traditional IRA. She's more than 10 years younger than him, so the 10-year rule applies, with yearly withdrawals.

Her first required withdrawal is in 2026, when she's 52: $500,000 ÷ 34.3 = $14,577. The account must be empty by the end of 2035.

Here are two ways she could handle it. To keep the comparison simple, the example ignores investment growth and uses 2026 brackets throughout.

Waiting leaves most of the account for one year. That pushes much of it into the 32% and 35% brackets. Spreading it evenly keeps each year in the 24% bracket and saves about $28,000. With investment growth, the gap would usually be larger, because the year-10 balance would be bigger.

Using lower-income years

Even spreading isn't always the cheapest. If Maya plans to retire at 58, her income falls in the last few years of the window. Taking larger withdrawals then, in lower brackets, could cost less than equal amounts. Watch other thresholds too, such as Medicare IRMAA once you're 63 or older and the ACA premium tax credit if you retire before 65.

Other points to know

• You can't roll an inherited IRA into your own IRA unless you're the surviving spouse. Move it by a direct transfer to an account titled as an inherited IRA.
• There's no 10% early-withdrawal penalty on inherited IRA withdrawals, whatever your age.
• Inherited Roth IRAs also follow the 10-year rule for most heirs. Because Roth owners have no required beginning date, no yearly withdrawals are required. Withdrawals are generally tax-free if the Roth was at least five years old.
• Missing a required withdrawal triggers an IRS excise tax on the shortfall, reduced if you correct it promptly.
• State tax applies where you live, not where the owner lived.

Planning from the owner's side

If you're the owner, the 10-year rule affects what your heirs keep. Heirs in high brackets may net much less from pre-tax money than from Roth or taxable money. Taxable accounts also get a step-up in basis at death. Roth conversions in your own low-income years can shift the tax to your rates instead of theirs. See estate basics.

How the app handles inherited IRAs

On Accounts, add an inherited IRA with the original owner's birth year and death year. Say whether they had passed their required beginning date. Then choose your beneficiary type: spouse, minor child, disabled or chronically ill, not more than 10 years younger, or other.

Each December, the projection takes the required amount:

• For other beneficiaries, it takes yearly withdrawals from the Single Life Table when the owner had passed the required beginning date. It empties the account by the end of the 10th year either way.
• For the eligible types, it takes yearly withdrawals over your life expectancy, reduced by one each year.

The app doesn't switch a minor child to the 10-year rule at majority. If a spouse has treated the IRA as their own, enter it as their own IRA instead.

On the owner's side, the Estate screen shows each heir's share after the income tax they'd owe on inherited pre-tax money.

Frequently asked questions

Do I have to take the money out evenly?

No. Only the yearly required amounts, if they apply, and the year-10 deadline are fixed. Anything in between is up to you.

Does the 10-year clock reset if I die before it ends?

No. Your own beneficiary must finish emptying the account by your original deadline.