When someone inherits an IRA, the paperwork usually shows up during one of the hardest seasons of their life. Then, somewhere between the funeral and the first meeting with the custodian, they hear about something called the 10-year rule. Around Perry and Warner Robins, the version I hear most often goes like this: "I have ten years before I have to touch it, right?"
Sometimes that is true. Often it is not. And the difference can cost real money.
Do you have to take money out of an inherited IRA every year?
It depends on two things: who you are as a beneficiary, and whether the original owner had already started their own required withdrawals before they passed away. Some beneficiaries can wait until year ten. Others must take a withdrawal every single year. The IRS rules for beneficiaries sort people into categories, and your category decides your schedule.
That is the honest answer, and it is why I never let a client assume anything about an inherited account until we have looked at the details together.
What does the 10-year rule actually require?
Since the SECURE Act, most non-spouse beneficiaries who inherit an IRA from someone who died after 2019 must empty the account by December 31 of the year containing the tenth anniversary of the owner's death, according to IRS Publication 590-B. That part gets all the headlines.
Here is the part that gets missed. The 10-year rule sets the finish line. It does not always let you coast until you get there. Think of it like a ten-year mortgage. The whole balance is due at the end either way, but some borrowers also owe a payment every year along the way.
The key question: had the original owner started required withdrawals?
Everything hinges on whether the person you inherited from had reached their required beginning date, which is generally April 1 of the year after they reach their RMD age. Under current law that age is 73 for people born from 1951 through 1959, and 75 for people born in 1960 or later.
If the owner died before that date, most non-spouse beneficiaries have flexibility. You can take money out every year, skip years, or wait until year ten, as long as the account is empty by the deadline, per IRS Publication 590-B.
If the owner died on or after that date, the IRS final regulations generally require you to take an annual required minimum distribution in years one through nine, and then empty whatever is left by the end of year ten.
One more wrinkle worth knowing. The IRS waived those annual beneficiary withdrawals from 2021 through 2024 while everyone waited on the final rules, but the waivers ended and annual RMDs became mandatory starting in 2025. If you inherited a few years ago and have not taken anything out yet, this is the year to get square with the schedule.
Who is exempt from the standard 10-year treatment?
The IRS carves out a group called eligible designated beneficiaries, and they can generally stretch withdrawals over their own life expectancy instead. Per IRS Publication 590-B, the group includes a surviving spouse, the owner's minor child, a disabled individual, a chronically ill individual, and anyone not more than ten years younger than the owner, such as a sibling close in age.
Figuring out whether you fit one of those categories is not always obvious, especially for the disabled and chronically ill definitions. That is a conversation for your tax professional, and it is worth having before your first withdrawal, not after.
What if you inherited from your spouse?
A surviving spouse holds cards no other beneficiary gets. Depending on the situation, a spouse can treat the inherited IRA as their own or roll it into their own IRA, which changes the withdrawal timeline and often the tax picture. A spouse can also choose to remain a beneficiary, which sometimes makes sense for a younger widow or widower who may need penalty-free access to the money.
The point is simple: a spouse should never copy the plan their adult children would use. The options are different, and so is the best answer.
Are inherited Roth IRAs different?
Yes, in a helpful way. Because Roth owners never have lifetime required withdrawals, a Roth owner is always treated as having died before their required beginning date. That means no annual withdrawals are required during the ten years, though the account must still be emptied by the end of year ten for most non-spouse beneficiaries.
Even better, qualified withdrawals from an inherited Roth are generally tax free, as long as the original owner first funded a Roth at least five years before the withdrawal. For many families, that makes an inherited Roth the account you touch last and let grow the longest.
Why does withdrawal timing matter so much?
Because every dollar from an inherited traditional IRA is generally taxed as ordinary income to you, the year you take it. Wait until year ten and take it all at once, and you can shove yourself into a higher tax bracket, and if you're at the right age, it can raise your Medicare premiums and make more of your Social Security taxable. That's not a small tax consequence, and it's all coming in one year rather than over time. Spread the withdrawals out, and you may keep each year's income in a friendlier range.
One bit of good news: inherited accounts are exempt from the 10 percent early withdrawal penalty, even if you are under 59 and a half. The right schedule depends on your income, your bracket, and your plans, which is why this decision deserves more thought than a coin flip.
What happens if you miss a required withdrawal?
The IRS can charge an excise tax of 25 percent of the amount you should have taken, reduced to 10 percent if you correct it within about two years. The IRS can also waive the penalty entirely for reasonable cause if you take the missed amount and file Form 5329 with an explanation. Better than the old 50 percent penalty, but still a painful bill for an honest mistake.
A quick checklist before your first withdrawal
Before you take a dime, confirm these six things with your custodian and your tax professional:
- The date of death, which starts the ten-year clock
- Whether the owner had reached their required beginning date
- Your beneficiary category
- The custodian's calculated annual RMD, if one applies
- Your year-ten deadline
- Your tax withholding plan for each withdrawal
Fifteen minutes of confirming beats years of undoing.
Planning ahead for the people who will inherit from you
If you are reading this as an account owner rather than a beneficiary, this is your nudge. The rules your heirs will face depend heavily on choices you make now. Reviewing your beneficiary designations regularly, thinking through which assets are friendliest to leave to heirs, and coordinating your accounts with your broader estate and legacy plan can save your family taxes, confusion, and stress during a season when they will have plenty of both.
And for wills, trusts, and the legal documents themselves, a qualified estate attorney is the right person for the job. I am glad to help you understand how the pieces fit together, and I will happily point you toward the legal help when you need it.
Frequently asked questions
Can I leave an inherited IRA untouched for ten years?
Sometimes. If the owner died before their required beginning date, most non-spouse beneficiaries can wait, as long as the account is empty by the year-ten deadline. If the owner had already started required withdrawals, you generally owe an annual withdrawal in years one through nine.
Are inherited IRA withdrawals taxable?
Traditional inherited IRA withdrawals are generally taxed as ordinary income. Inherited Roth withdrawals are generally tax free once the original owner's five-year holding period is met. Neither carries the 10 percent early withdrawal penalty.
Are the rules different for a surviving spouse?
Yes. A spouse can treat the account as their own, roll it into their own IRA, or stay a beneficiary. Each path has a different withdrawal schedule and tax result, so a spouse should get advice before choosing.
What if I miss a required withdrawal?
The IRS can charge 25 percent of the shortfall, reduced to 10 percent if you fix it within about two years, and it can be waived for reasonable cause. Take the missed amount as soon as you catch it and talk to your tax professional about Form 5329.
If you have inherited an IRA, or you want your own accounts set up so your family inherits well, come see us at Crossroads Financial in Perry. We will walk through it together, in plain English, at whatever pace you need.
The information in this article is for educational purposes only and is not tax, legal, or investment advice. Inherited IRA rules depend on your specific situation, and the rules themselves can change. Before making any withdrawal decision, please consult a qualified tax professional who can review your full picture. Crossroads Financial helps clients understand how inherited assets fit into their retirement income and legacy planning, and we are glad to work alongside your tax and legal advisors.
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