Quick Answer:
The 10-year rule requires most non-spouse beneficiaries to empty an inherited IRA by the end of the tenth year after the owner’s death. It replaced the old “stretch IRA” for people who inherited after 2019. A group called eligible designated beneficiaries, including spouses and minor children, is exempt and can still stretch withdrawals over a longer period.
Key takeaways:
– The 10-year rule forces most non-spouse heirs to fully empty an inherited IRA within 10 years.
– It applies to accounts inherited after 2019 and replaced the lifetime “stretch IRA.”
– Eligible designated beneficiaries, such as spouses and minor children, are exempt from the 10-year rule.
– How you time withdrawals across the 10 years can dramatically change the total tax you pay.
The rules for inherited IRAs changed dramatically a few years ago, and the 10-year rule is the heart of that change. It shortened how long heirs can stretch out withdrawals, which raised the tax stakes for anyone inheriting a large retirement account. Here’s who it hits, who’s exempt, and how to handle it.
What is the 10-year rule?
The 10-year rule requires a non-spouse beneficiary to withdraw the entire balance of an inherited IRA by December 31 of the tenth year after the original owner’s death. Before the SECURE Act, heirs could “stretch” withdrawals over their own life expectancy, spreading the tax across decades. For deaths after 2019, that option is gone for most beneficiaries, and the whole account has to come out within a decade.
The clock starts the year after death. Per the IRS, whether you also have to take annual withdrawals during those 10 years depends on whether the original owner had already begun their required minimum distributions, a detail covered in how do RMDs work on inherited IRAs. Either way, the account must be empty by the end of year 10.
Who does the 10-year rule apply to?
The 10-year rule applies to most non-spouse beneficiaries, often called non-eligible designated beneficiaries. That covers the typical case: an adult child, a grandchild, a friend, or a sibling more than 10 years younger, who inherits an IRA. If you don’t fall into one of the exempt categories, you’re subject to the 10-year clean-out.
This is a big change for adult children in particular, who are the most common inheritors of IRAs. An adult child inheriting a large traditional IRA now has to withdraw it, and pay income tax on it, within 10 years, often during their peak earning years. That compressed timeline is what makes the rule so tax-significant, and why planning the withdrawals matters so much.
Who is exempt from the 10-year rule?
A group called eligible designated beneficiaries is exempt from the 10-year rule and can still stretch withdrawals. If you fall into 1 of these categories, you may use the older, longer approach based on life expectancy.| Eligible Designated Beneficiary | Treatment |
|---|---|
| Surviving spouse | Most flexible; can treat the IRA as their own |
| Minor child of the owner | Stretches until age 21, then the 10-year clock starts |
| Disabled or chronically ill person | Can stretch over their life expectancy |
| Someone not more than 10 years younger than the owner | Can stretch over their life expectancy |
Everyone outside these categories is subject to the 10-year rule. Note that a minor child’s exemption ends at 21, at which point the 10-year clock begins, so even that exception is time-limited. Spouses have the most options of all, as covered in what happens to your IRA and 401(k) when you die.
How do you empty an inherited IRA tax-smartly?
You empty it tax-smartly by spreading withdrawals across the 10 years to avoid spiking your income in any single year. The worst approach is usually to wait until year 10 and take everything at once, which can push a huge amount of income into the top brackets in that year. Taking measured withdrawals each year, timed around your own income, generally produces a far lower total tax bill.
The best schedule depends on your other income over the decade. If you expect lower-income years, perhaps a gap between jobs or an early-retirement stretch, concentrate withdrawals there. If your income is steady, spreading evenly across all 10 years often works well. Coordinating an inherited IRA drawdown with the rest of your financial picture is exactly the kind of planning that belongs in a broader estate and tax strategy, covered in how do you create an estate plan in retirement.
Why did the stretch IRA go away?
The stretch IRA went away because Congress wanted to collect tax on inherited retirement accounts sooner. Under the old rules, a young beneficiary could stretch withdrawals from an inherited IRA over their own life expectancy, sometimes 40 or 50 years, letting the account grow tax-deferred for decades while keeping annual taxable withdrawals tiny. The SECURE Act, passed in 2019, ended that for most non-spouse heirs and replaced the lifetime stretch with the 10-year window.
The change was essentially a revenue measure. Forcing the account out within 10 years accelerates the income tax the government collects, at the cost of compressing that tax into a shorter, often higher-bracket period for the heir. For families with large IRAs, this made lifetime tax planning by the original owner far more valuable. Converting to Roth before death, for example, hands heirs a tax-free account they still must empty in 10 years, but with no income tax on the withdrawals. Understanding why the rule exists helps explain why so much inherited-IRA planning now happens before the owner dies, not after.
Frequently Asked Questions
Does the 10-year rule apply to inherited Roth IRAs?
Yes, most non-spouse heirs must empty an inherited Roth within 10 years. But because qualified Roth withdrawals are tax-free, heirs usually let it grow and withdraw at the end of the 10 years to capture the most tax-free growth.
Do I have to take withdrawals every year, or just by year 10?
It depends on the original owner. If they had already begun required minimum distributions, you generally must take annual withdrawals in years 1 through 9 and empty the account by year 10. If they hadn’t, you
only need it empty by year 10.
What happens if I don't empty the account in 10 years?
Any amount left after the deadline is subject to a penalty on top of the tax. It’s important to plan the withdrawals so the account is fully distributed by the end of the tenth year.
Can I still stretch an IRA I inherited before 2020?
Generally yes. Inheritances from deaths before 2020 typically follow the older stretch rules based on your life expectancy. The 10-year rule applies to deaths after 2019.
The 10-year rule turned inherited IRAs into a real tax-planning challenge, and how you time the withdrawals can save or cost a great deal. If you’ve inherited an account and want a tax-smart drawdown plan, request a meeting and we’ll build it around your income.
About the Author
Kurt Supe, CPA, is a Retirement Planner and Chief Investment Officer for Creative Financial Group. He has spent 30 years helping retirees lower their lifetime tax bills. Connect on X and YouTube at @KurtSupeCPA, or read more on the CFG team page.
