Inherited IRAs: How the SECURE Act's 10-Year Rule Actually Works

Inheriting an IRA used to come with a well-known perk: the ability to stretch withdrawals, and the associated tax bill, over a beneficiary's entire lifetime. The SECURE Act, signed into law in December 2019, ended that option for most non-spouse heirs of accounts inherited starting in 2020. In its place is a rule that sounds simple—empty the account within 10 years—but has proven confusing in practice, partly because of a follow-up dispute over whether annual withdrawals are also required during those 10 years.

Who Gets the 10-Year Rule, and Who Doesn't

The 10-year rule applies to 'designated beneficiaries' who are not in a protected category. Under IRS guidance, a special group called 'eligible designated beneficiaries' (EDBs) is exempt from the strict 10-year cutoff and can still use life-expectancy payments, similar to the old stretch rules.

• Surviving spouses, who also have the option to roll the inherited IRA into their own IRA.
• Minor children of the original account owner (until they reach the age of majority, at which point the 10-year clock starts).
• Individuals who are disabled or chronically ill, as defined under IRS rules.
• Beneficiaries who are not more than 10 years younger than the deceased account owner, such as a sibling close in age.

Everyone else who inherits an IRA—adult children are the most common example—generally falls under the 10-year rule and must withdraw the full balance by December 31 of the tenth year after the owner's death.

The Twist: Annual RMDs Within the 10 Years

When the SECURE Act first passed, many advisors assumed the 10-year rule worked like a deadline with no interim requirement: take out any amount in any year, as long as the account is empty by year 10. In 2022, the IRS proposed regulations taking a different position: if the original account owner had already reached their required beginning date for RMDs before dying, most 10-year-rule beneficiaries must also take annual RMDs in years one through nine, based on their own life expectancy, in addition to fully depleting the account by year 10. If the owner died before their required beginning date, no annual RMDs are required during the 10 years—only the year-10 deadline applies.

This interpretation caught many beneficiaries off guard, since they had not taken distributions in 2021 or 2022 believing none were due. In response, the IRS issued a series of transition notices—2022-53, 2023-54, and 2024-35—waiving the excise tax on missed annual RMDs for 2021 through 2024 for affected inherited accounts. Final regulations issued in 2024 confirmed the annual-RMD requirement, and the IRS has indicated that 2025 is the first year beneficiaries are expected to resume or begin taking these required annual distributions on schedule.

Why the Details Matter for Taxes

Every dollar withdrawn from a traditional inherited IRA is generally taxed as ordinary income in the year it's distributed. That makes the timing choice within the 10-year window a genuine tax-planning decision, not just a compliance formality.

• Spreading withdrawals evenly across the 10 years can help avoid pushing income into a higher tax bracket in any single year.
• Waiting until year 10 to withdraw everything at once may create a large, one-time spike in taxable income.
• Beneficiaries in low-income years (such as between jobs or in early retirement) might accelerate withdrawals to use lower tax brackets while they're available.
• Roth IRAs inherited under the 10-year rule still must be emptied within 10 years, but qualified withdrawals remain tax-free, and no annual RMDs are required during the 10-year period regardless of the original owner's age.

Practical Steps After Inheriting an IRA

• Confirm with the IRA custodian whether the original owner had begun RMDs before death; this determines whether annual withdrawals are required during the 10-year window.
• Identify which beneficiary category applies—eligible designated beneficiary or the standard 10-year rule—since the rules and available strategies differ substantially.
• Keep records of any distributions taken and note IRS transition relief years (2021–2024) if annual RMDs were skipped during that period.
• Review IRS Publication 590-B and the final SECURE Act regulations, or consult a tax professional, before deciding on a withdrawal schedule for the remaining years.