Inherited IRA 10-Year Rule: The Annual RMD Surprise

01 — The Rule

The stretch is gone. The clock is ten years.

For deaths after 2019, most non-spouse heirs — your adult children, most importantly — can no longer “stretch” an inherited IRA over their own lifetime. The account must be empty by December 31 of the tenth year after the year of death.

A short list of people still gets the old treatment. Eligible designated beneficiaries may still stretch withdrawals over life expectancy:

A surviving spouse — who can also simply treat the account as their own. (What the survivor’s own tax picture looks like is its own trap; we wrote about the widow’s penalty separately.)
The owner’s minor child — until age 21, when the ten-year clock starts.
A disabled or chronically ill beneficiary.
A beneficiary not more than ten years younger than the owner — a sibling close in age, for example.

Everyone else is on the clock. And for most families, “everyone else” means exactly the people the account was saved for.

02 — The 2024 Surprise

Ten years to empty it — and for many heirs, a bill every year inside.

For a few years, most people read the 10-year rule as pure flexibility: empty it whenever you like, as long as it’s gone by year ten. The IRS’s 2024 final regulations settled the question differently, and the answer hinges on one date — whether the original owner had already started their own required withdrawals:

Owner died on or after their required beginning date (their own RMDs had begun): the heir must take a taxable required distribution every year, years one through nine — and still empty the account by year ten.
Owner died before that date: no annual requirement. The heir can wait, spread, or front-load — any schedule works, as long as the account is empty by year ten.

While the rules were in limbo, the IRS waived penalties for missed annual withdrawals from 2021 through 2024. That grace period is over — the annual requirement applies beginning in 2025. Miss one now and the excise tax is 25% of the amount that should have come out, reduced to 10% if corrected within the allowed window.

Why this matters before anyone inherits anything: whether your heirs get the flexible version or the forced-annual version depends on when you pass relative to your own RMD start date — which is set by your birth year. It’s one more way the shape of your account outlives you.

03 — The Math

The tax bill you can leave behind.

Run the arithmetic on a meaningful account and the shape of the problem appears. A hypothetical $2,000,000 traditional IRA left to your children and emptied over ten years is roughly $200,000 of forced taxable income to your heir, every year — before any growth along the way.

Hypothetical, for illustration. Assumes a traditional IRA and a non-spouse heir on the 10-year rule.

Now place that income where it actually lands. Heirs usually inherit in their own highest-earning years — their fifties, peak salary, peak bracket. Ten years of forced withdrawals stack on top of that salary, often pushing them into the top brackets on money you spent a lifetime saving at lower ones. And for an heir who is retired and on Medicare, those same distributions count toward the income lines that set their premiums — the two-year lookback applies to them too.

04 — The Roth Difference

Same ten years. Completely different decade.

An inherited Roth IRA sits under the same 10-year rule for most non-spouse heirs — but the decade looks nothing alike:

No annual withdrawals required. A Roth owner has no required beginning date, so the forced-annual version of the rule never applies. The heir can leave every dollar untouched until year ten.
Tax-free at the end. Qualified distributions from an inherited Roth come out with no federal income tax — no stacking on the heir’s salary, no bracket climb, no Medicare knock-on.
Ten full years of tax-free growth, then a clean handoff.

Set the two decades side by side — forced taxable income every year versus untouched tax-free growth — and you’re looking at the inheritance case for Roth conversion in a single frame. Whether converting actually makes sense for your household is a different question, with brackets, Medicare thresholds, and timing all pulling on it at once. The free guide walks that chain in order.

05 — The Levers

What a beneficiary can still control.

The clock is fixed. The schedule inside it usually isn’t — and the schedule is where the tax outcome is decided:

Timing within the ten years. Where annual withdrawals aren’t required, an heir expecting a lower-income stretch — a sabbatical, early retirement, a gap between jobs — can aim the biggest withdrawals at those years instead of taking a year-ten lump on top of a peak salary.
Level withdrawals versus a balloon. Even under the forced-annual version, only the minimum is required each year. Taking more than the minimum in early years can prevent a large, high-bracket balloon in year ten.
Withholding and estimates. Inherited-IRA income arrives with no employer withholding attached. Heirs who don’t adjust estimated payments meet the bill twice — once in April, once as a penalty.
The beneficiary form itself. The designation on file at the custodian — not the will — controls who inherits. An out-of-date form is the single cheapest estate mistake to fix and one of the most expensive to leave.

None of this is advice for any particular heir — it’s the map of which levers exist. The larger point sits a level up: the version of this decade your heirs get is mostly decided by what the account looks like, and when, while you still own it.

06 — Quick Answers

The questions people actually ask.

Do I have to take money out of an inherited IRA every year?

It depends on when the original owner died relative to their own required beginning date. If their own required withdrawals had already begun, you generally must take an annual required distribution in years one through nine and still empty the account by the end of year ten. If they died before that age, no annual withdrawals are required — you just have to empty the account by the end of year ten, on whatever schedule you choose.

Does the 10-year rule apply to an inherited Roth IRA?

Yes — most non-spouse heirs must still empty an inherited Roth within ten years. But because a Roth owner has no required beginning date, there are no annual required withdrawals in years one through nine, and qualified distributions come out tax-free. The account can grow untouched for the full ten years and then come out without a tax bill.

Who can still stretch an inherited IRA over their lifetime?

Eligible designated beneficiaries: a surviving spouse; the owner’s minor child, until age 21; a disabled or chronically ill beneficiary; and a beneficiary not more than ten years younger than the owner. Everyone else — including most adult children — is on the ten-year clock.

What is the penalty for missing a required withdrawal from an inherited IRA?

An excise tax of 25% of the amount that should have been withdrawn, reduced to 10% if the mistake is corrected within the allowed window. The IRS waived this penalty for missed annual distributions in 2021 through 2024 while the rules were being finalized; the annual requirement applies beginning in 2025.

Ten years to empty it.
And a bill every year inside.