Inherited IRA Rules in 2026: The 10-Year Rule Explained

The 2019 SECURE Act Changed Inheritance Rules

Before 2020, non-spouse beneficiaries could take "stretch" distributions over their lifetime (potentially 50+ years of tax-deferred growth).

Example (old rules pre-2020): You inherit a $500,000 IRA at age 40. You could take RMDs over your remaining 45-year life expectancy, stretching withdrawals and minimizing annual taxes.

The SECURE Act eliminated this for most beneficiaries (effective January 1, 2020).

New rule (SECURE Act): Non-spouse beneficiaries must withdraw the full inherited IRA balance by December 31 of the 10th year following the account owner's death.

Example (new rules post-2020): You inherit a $500,000 IRA when your parent dies in 2024. You must withdraw the full $500,000 by December 31, 2034 (10 years).

The 10-year window is the full timeframe to distribute; the IRS doesn't require annual distributions (RMDs) during the 10 years, but you must finish by year 10.

Exceptions to the 10-Year Rule

Certain beneficiaries are exempt from the 10-year rule and can still use the old "stretch" strategy:

1. Surviving spouse: can treat the inherited IRA as their own by rolling it into their own IRA, deferring distributions until their own RMD age. That age is 73 for anyone born between 1951 and 1959, and 75 for anyone born in 1960 or later — SECURE 2.0 moved it, and the second step catches everyone currently in their sixties. A spouse who does not roll it over remains an eligible designated beneficiary and can take life-expectancy distributions; they are not forced into 10 years either way.

2. Disabled or chronically ill beneficiaries: can take lifetime distributions based on life expectancy.

3. Beneficiaries not more than 10 years younger than the account owner: can use single life expectancy — the classic case being a sibling or an unmarried partner of similar age.

4. Minor children of the account owner (not grandchildren, and not any other minor): take annual life-expectancy distributions until they reach 21 — the final regulations set the age at 21, not 18 — and the 10-year clock then starts, so the account must be emptied by age 31.

For most people — adult children above all, which is the overwhelmingly common case — the 10-year rule applies with no exception available.

RMD Requirements During the 10 Years

This is the single most misunderstood point in the whole subject, and the answer changed in 2024. For four years the IRS itself was unsure, waiving the penalty for missed annual distributions in 2021, 2022, 2023 and 2024 while it worked out the regulations. The final rules landed in July 2024 and took effect for 2025, so 2026 is the second year in which they are actually enforced. A great deal of advice written between 2020 and 2024 — including plenty still online — is wrong on exactly this point.

The rule now depends entirely on whether the person who died had reached their required beginning date, the April 1 following the year they hit RMD age:

• If the deceased had already started RMDs: you must take an annual distribution in each of years 1 through 9, calculated on your own single life expectancy, and empty the account by December 31 of year 10. Both requirements apply at once. You cannot let it ride.

• If the deceased had NOT yet reached their required beginning date: there is no annual requirement. You can leave the balance invested for nine years and take everything in year 10 if that suits your tax position.

• Inherited Roth IRAs never carry an annual RMD regardless of the owner's age, because a Roth owner has no required beginning date. The 10-year deadline still applies.

Practically: ask the custodian whether the decedent had taken an RMD for the year of death, and whether one is still owed for that year — the year-of-death RMD is the beneficiary's responsibility if the owner died before taking it, and it is due by December 31 of the year of death, not on your 10-year schedule. To size the annual figure against your own life expectancy factor rather than guessing, work the distribution out year by year.

Distribution Strategy: Maximizing Tax Efficiency

Since annual RMDs are not required (in most cases), you have flexibility:

Strategy 1: Wait until year 10, then withdraw

Pros:

• Maximize tax-deferred growth for 10 years.
• Minimize annual tax burden (no required income each year).

Cons:

• Year 10 withdrawal is a large lump sum, potentially pushing you into a higher tax bracket.
• If the inherited IRA is large, taxes in year 10 could be substantial.

Example: Inherit $500,000 IRA at age 40. Let it grow at 8% annually.

By year 10, it's worth about $1,080,000. Withdraw the whole thing in year 10.

Do not compute the tax as $1,080,000 × 24%. A withdrawal that size stacks on top of your salary and walks straight up the bracket table: for a single filer in 2026 the 32% band starts at $201,775 of taxable income, 35% at $256,225 and 37% at $640,600. A person earning $120,000 who adds a million dollars of ordinary income has most of it taxed at 35% and a slice at 37%, so the true bill is closer to a third of the account than the quarter a flat 24% implies — a difference of roughly $100,000. Add state income tax on top, and note that the same year's spike can trigger the 3.8% net investment income tax on your other investment income and, if you are over 63, an IRMAA surcharge on your Medicare premiums two years later. Check which bands the withdrawal would actually land in before choosing a year to take it.

Strategy 2: Spread distributions over 10 years

Pros:

• Spread income across 10 years, potentially staying in lower brackets.
• Reduce tax impact each year.
• Still enjoy growth on the remaining balance.

Cons:

• Must be disciplined to withdraw annually (no automatic RMD rules).
• Withdrawals still subject to income tax each year.

Example: Inherit $500,000. Withdraw $50,000/year for 10 years (plus growth).

Year 1: Withdraw $50,000 (rest grows). Taxable: $50,000 × 24% = $12,000. Year 2: Withdraw ~$54,000 (8% growth on remaining $450,000 plus new contributions). Taxable: ~$13,000. ... Year 10: Withdraw final balance.

Total tax spread over 10 years is less punishing than a lump-sum withdrawal.

Which strategy? If your other income is modest, spreading withdrawals is safer (avoids pushing into higher brackets). If you're young and earning well, waiting until year 10 might be fine if you expect income to stay high anyway.

Roth vs. Traditional Inherited IRAs

Inherited Roth IRA: distributions of contributions and converted amounts are always tax-free; earnings are tax-free once the account has satisfied a five-year holding period, and the clock counts from when the original owner first opened any Roth IRA — their years carry over to you. You still must empty the account within 10 years, but there is no annual RMD and no tax on a qualified distribution.

Inherited Traditional IRA: distributions are fully taxable as ordinary income. There is no step-up in basis for retirement accounts, which is the crucial difference from inheriting a brokerage account — an inherited stock portfolio gets its cost basis reset to the date-of-death value, wiping out a lifetime of unrealised gain, while the same money inside an IRA is taxed at ordinary rates on the way out. Two estates of identical size can leave heirs with wildly different after-tax results depending on which wrapper the assets sat in.

Strategy: if you inherit both, drain the traditional IRA first and let the Roth run the full 10 years. Every year of Roth growth is tax-free forever; every year of traditional growth is a bigger tax bill later. This is the reverse of the intuition most people have, which is to spend the taxable one last.

And if you are the one doing the leaving: this asymmetry is the strongest argument for Roth conversions late in life. Paying the tax yourself at your rate — likely lower, in retirement, than your working children's — converts a taxable inheritance into a tax-free one and removes the heir's 10-year squeeze entirely. Model what a conversion costs now against what it saves them before assuming it isn't worth it.

Inherited Spousal IRAs: The Rollover Advantage

If you inherit your spouse's IRA, you can treat it as your own:

1. Roll the inherited IRA into your own IRA.
2. Defer distributions until you reach your own RMD age — 73 if you were born 1951–1959, 75 if born in 1960 or later.
3. Extend the deferral period significantly if you are younger than your spouse was.

Example: your spouse dies at 75 with a $500,000 IRA. You're 60, born in 1966.

• Roll it over: nothing comes out until you turn 75, and the RMDs that then begin are calculated on the Uniform Lifetime Table, which produces much smaller distributions than the single life table. Fifteen more years of untouched compounding.
• Keep it as an inherited IRA instead: you are an eligible designated beneficiary, so you take annual life-expectancy distributions — you are not forced into the 10-year rule, contrary to what is often written. But those distributions start immediately and are calculated on the single life table, so more comes out sooner.

For a surviving spouse under RMD age with no need for the money, the rollover almost always wins. The one case where keeping it as an inherited IRA is better: if you are under 59½ and need to spend it. Withdrawals from an inherited IRA are never subject to the 10% early-withdrawal penalty; withdrawals from your own IRA before 59½ are. A 52-year-old widow who needs income should keep it inherited until 59½, then roll it over — you can do the rollover at any later date.

Since 2024, SECURE 2.0 also lets a surviving spouse elect to be treated as the deceased spouse for RMD purposes, which is worth asking a custodian about when the deceased was the younger of the two.

Beneficiary Designation and Multiple Beneficiaries

If the account is left to multiple beneficiaries, the 10-year clock starts at the original owner's death for all beneficiaries.

Example: Parent dies in 2024. IRA is split between 3 children (ages 40, 45, 50). All three must empty their portion by December 31, 2034 (10 years from death).

The 10-year deadline is the same for all beneficiaries, regardless of age.

Split the account anyway, and do it by 31 December of the year following the death. The 10-year deadline is uniform, but the annual RMD — where one is required — is calculated on each beneficiary's own life expectancy only if separate accounts exist by that date. Miss it and every beneficiary is measured against the oldest one's shorter life expectancy, forcing larger distributions on the youngest. Splitting also removes the practical problem of three siblings having to agree on when to withdraw.

Creditor Protection

Generally, inherited IRAs have less creditor protection than IRAs you contribute to yourself. In bankruptcy or lawsuits, inherited IRAs may be more vulnerable.

Creditor protection varies by state. Consult an attorney if you have significant inherited IRA balances and liability concerns.

What Actually Changed, and When

The reason so much conflicting advice exists on this topic is that the law and the regulations arrived four years apart.

Two consequences for 2026. First, if you inherited between 2020 and 2024 from someone already taking RMDs, your annual distributions began in 2025 — there was no grace period, and no custodian was obliged to tell you. Check whether you took one. Second, anyone who inherited before 2020 still has their stretch and should not let a well-meaning adviser move them onto a 10-year schedule they are not subject to.

The penalty for missing a required distribution is no longer the notorious 50%. SECURE 2.0 cut it to 25%, and to 10% if you correct it and file Form 5329 within a two-year correction window. It is still worth far more than the tax on the distribution itself, so if you find you have missed one, take it immediately and file the form.

Examples: Withdrawal Planning

Scenario 1: Inherit a $300,000 traditional IRA at 50, assume 8% growth

Option A is the default answer for most people: it deliberately gives up some tax-deferred growth to keep every dollar out of the higher bands. Option B is right only if you expect your other income to be dramatically lower in year 10 — a planned sabbatical, a retirement, a business loss year.

The point is not which row wins in the abstract. It is that the 10-year rule hands you a choice of tax years, and that choice is worth tens of thousands of dollars. Map your expected income for each of the ten years before you take the first distribution, and put the largest withdrawals in your lowest-income years.

Scenario 2: Inherit $1,000,000 Roth IRA, age 40

• No tax on withdrawals.
• You can let it grow for 10 years ($2,000,000+ at 8% return).
• At year 10, withdraw the full $2,000,000 tax-free.
• Or spread withdrawals over 10 years, tax-free.

The Roth inherited IRA is much more flexible since there's no tax liability.

Documentation and Reporting

When you inherit an IRA, the custodian will issue:

• Form 5498: the annual information return reporting the account's fair market value at 31 December and its beneficiary status. It arrives in May, after you have already filed, which is why you should not wait for it — the December statement carries the same balance.
• Form 1099-R: reports each distribution you take and any tax withheld. Box 7 carries code 4 (death), which is what tells the IRS the 10% early-withdrawal penalty does not apply no matter your age.

Report inherited IRA distributions as taxable income on Form 1040. If you miss a required distribution, the correction is Form 5329, on which you both report the shortfall and request a waiver of the penalty for reasonable cause — the IRS grants these routinely when the missed distribution has been taken.

Keep records of:

• The account owner's date of death — it starts the 10-year clock, and the deadline is 31 December of the tenth year following death, not ten years to the day
• Whether the deceased had reached their required beginning date, which determines whether annual RMDs apply
• Whether the year-of-death RMD was taken, and by whom
• Distribution dates, amounts, and tax withheld
• For an inherited Roth, the year the original owner first opened a Roth IRA

Split the account before 31 December of the year after death if there are several beneficiaries. Establishing separate inherited IRAs by that deadline lets each beneficiary use their own life expectancy and their own distribution timing. Miss it and the whole group is measured against the oldest beneficiary's life expectancy, which is worse for everyone younger.

FAQ

Do I have to take annual withdrawals during the 10 years, or not?

It depends on one fact about the person who died: had they reached their required beginning date — the April 1 after the year they hit RMD age? If yes, the IRS's July 2024 final regulations require an annual distribution in each of years 1 through 9, calculated on your own single life expectancy, as well as emptying the account by year 10. If they died before that date, there is no annual requirement. Inherited Roth IRAs never carry an annual RMD. The penalty for missing one is 25% of the shortfall, reduced to 10% if you correct it within two years and file Form 5329.

Can I roll an inherited IRA into my own IRA?

Only if you are the surviving spouse. Every other beneficiary must keep it as a separate inherited IRA, titled in the deceased's name for your benefit — "John Smith, deceased, IRA FBO Jane Smith". If a non-spouse beneficiary moves the money into their own IRA, the entire balance is treated as distributed and taxed in that year, and the mistake cannot be undone. When you move an inherited IRA between custodians, insist on a trustee-to-trustee transfer; the 60-day rollover route does not exist for non-spouse beneficiaries.

I'm in my peak earning years. Should I withdraw anyway?

Usually yes, in some amount, rather than waiting. The 10-year rule removes the option of waiting until retirement — the account has to be empty long before then for most people who inherit in their forties and fifties. Withdrawing nothing for nine years guarantees the entire balance lands in a single year, which is the highest-tax outcome available. The alternative worth checking: if you expect to retire, take a sabbatical, or have a low-income year inside the ten-year window, front-load small withdrawals and put the large ones there. A single year at a 12% or 22% marginal rate instead of 35% on $300,000 is worth $40,000 or more.

Does an inherited IRA count for the 10% early-withdrawal penalty if I'm under 59½?

No. Distributions to a beneficiary are exempt from the 10% additional tax at any age — that is what the code 4 on your Form 1099-R signifies. You still owe ordinary income tax on every dollar from a traditional inherited IRA, but the penalty does not apply. This is the one real advantage a younger beneficiary has, and it is also why a surviving spouse under 59½ who needs the money should delay the spousal rollover: once it becomes your IRA, the early-withdrawal penalty applies again.

What if the IRA was left to a trust or to my estate?

This is where inherited IRAs get expensive. A properly drafted "see-through" trust can look through to the individual beneficiaries and use their timelines; a trust that fails the requirements, or an IRA with no named beneficiary that defaults to the estate, generally falls under the five-year rule instead of ten if the owner died before their required beginning date — half the time to distribute, and a much sharper tax spike. If a trust is named, get the trust document in front of an estate attorney before taking any distribution; the custodian's default treatment is not always the correct one, and the deadlines are unforgiving.

Sources

• Internal Revenue Service, Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs) — the controlling reference for beneficiary distributions.
• Internal Revenue Service, final regulations on required minimum distributions under the SECURE Act, published July 2024.
• Internal Revenue Service, Notices 2022-53, 2023-54 and 2024-35 — the successive waivers of the missed-RMD excise tax for 2021 through 2024.
• SECURE Act (Division O, Consolidated Appropriations Act 2020) and SECURE 2.0 Act (Division T, Consolidated Appropriations Act 2023) — the statutes behind the 10-year rule, the RMD age changes, and the reduction of the missed-RMD penalty from 50% to 25%.
• Internal Revenue Service, Form 5329 and its instructions — the mechanism for reporting and requesting a waiver of a missed distribution.