What Happens to an Inherited IRA Under SECURE 2.0? A 2026 Guide for Beneficiaries
- HFF Staff Writer
- 3 hours ago
- 7 min read
If you've inherited an IRA from someone who died in 2020 or later, the IRS now requires most non-spouse beneficiaries to empty the account within 10 years of the original owner's death — and, depending on the deceased's age, you may also owe annual required minimum distributions (RMDs) along the way. Missing those RMDs can trigger a 25% excise tax on the shortfall. Here's exactly how the rules work, who's exempt, and what to do next.
The short version
The SECURE Act of 2019 ended the "stretch IRA" for most people who inherit an IRA from someone outside their immediate household. Before 2020, a beneficiary could spread withdrawals — and the tax bill that comes with them — over their own lifetime, sometimes 40 or 50 years. Now, most beneficiaries have to withdraw the entire balance within 10 years.
SECURE 2.0, passed in late 2022, added a few more pieces: it raised the age account owners must start taking their own RMDs to 73 (rising to 75 in 2033), and it cut the penalty for a missed RMD from 50% down to 25% — or just 10% if you correct the mistake quickly.
The part that tripped up even seasoned advisors was whether you had to take money out every year during that 10-year window, or whether you could just wait and empty the account in year 10. The IRS settled this in final regulations issued in July 2024, effective for the 2025 distribution year forward. The answer depends entirely on one fact: had the person who left you the IRA already started taking their own RMDs before they died?
Do you have to take annual withdrawals, or can you wait until year 10?
This is the single most important question for anyone managing an inherited IRA right now, and it has a clean answer:
If the original owner died before their Required Beginning Date (RBD): You don't have to take anything out in years 1 through 9. You can let the account grow and withdraw it all in year 10, take it out gradually, or do whatever mix makes sense for your tax situation — as long as the account is fully emptied by December 31 of the 10th year after death.
If the original owner died on or after their RBD: You must take an annual RMD in years 1 through 9, calculated using your own life expectancy, in addition to fully emptying the account by the end of year 10. This catches a lot of people off guard, because it means the 10-year rule isn't just a deadline — it comes with yearly homework attached.
The Required Beginning Date is April 1 of the year following the year the owner turned 73 (this age requirement phased up from 72 under SECURE 2.0, and is scheduled to rise again to 75 starting in 2033). So a parent who passed away at 80 had almost certainly already crossed their RBD; a parent who passed away at 68 had not.
A quick reference
Scenario | Annual RMDs in years 1–9? | Must empty account by | Who calculates the RMD? |
Owner died before RBD, non-spouse beneficiary | No | End of year 10 | N/A |
Owner died on/after RBD, non-spouse beneficiary | Yes | End of year 10 | Based on beneficiary's own life expectancy, recalculated each year |
Eligible designated beneficiary (spouse, minor child, disabled/chronically ill, or someone less than 10 years younger than owner) | Optional — can stretch over lifetime instead | No 10-year deadline | Based on beneficiary's life expectancy |
Inherited Roth IRA, non-spouse beneficiary | No | End of year 10 | N/A — but tax-free if account met the 5-year rule |
Who's exempt from the 10-year rule?
The IRS calls these people "eligible designated beneficiaries," and they can still use the pre-2020 stretch approach — spreading withdrawals over their own life expectancy rather than facing a hard 10-year deadline. You qualify if you are:
The surviving spouse of the account owner
A minor child of the account owner (this exception ends once the child turns 21, at which point the remaining balance shifts to the 10-year rule)
Disabled or chronically ill, as defined by the IRS
Anyone not more than 10 years younger than the original account owner (a common scenario for siblings or close-in-age beneficiaries)
Surviving spouses have the most flexibility of anyone on this list. A spouse can choose to roll the inherited IRA into their own IRA and treat it entirely as their own — continuing to contribute to it and delaying RMDs until their own required age — or keep it as a separate inherited IRA and stretch distributions over their lifetime instead.
What if you missed RMDs during the years of confusion?
If you inherited an IRA after 2019 and didn't take annual distributions between 2021 and 2024 because the rules were genuinely unsettled, the IRS waived the penalty for those specific years. That grace period did not extend into 2025 and beyond. If your situation requires annual RMDs (because the original owner had passed their RBD), you needed to resume — or start — those withdrawals for the 2025 distribution year, and that requirement continues annually through year 9.
This is one of the more common ways beneficiaries get caught off guard: assuming a multi-year pause means the requirement went away, when it actually just paused the clock on enforcement.
Inherited Roth IRAs work a little differently
The 10-year rule applies to inherited Roth IRAs too, but with one major advantage: because the original Roth owner never had an RBD, there are no required annual withdrawals during years 1 through 9, regardless of when the owner died. You simply need to empty the account by the end of year 10.
The bigger question for Roth beneficiaries is usually tax treatment, not timing. Withdrawals are tax-free as long as the original owner's five-year holding period (measured from their first Roth contribution, not from when you inherited it) had already been satisfied. Because qualified withdrawals are tax-free, many beneficiaries choose to let the account grow untouched and take the full balance in year 10 — though that's a strategy worth stress-testing against your broader financial picture rather than assuming it's automatically right.
Why this matters for your overall plan — not just your IRA
The 10-year rule turns an inherited IRA into a forced, time-limited tax event. A few things worth thinking through with a financial professional rather than deciding in isolation:
Bracket management. Taking even, planned withdrawals across the 10-year window often beats waiting until year 10 and taking one enormous distribution that pushes you into a much higher tax bracket.
Timing around your own income. If you're a high earner now but expect to retire or have a lower-income year within the 10-year window, the timing of withdrawals can meaningfully change your total tax bill.
Coordinating with other accounts. An inherited IRA rarely exists in a vacuum — it interacts with your own retirement contributions, your own future RMDs, and your broader investment allocation.
Disclaiming the inheritance. In some cases, a beneficiary can disclaim (decline) an inherited IRA within nine months of the owner's death, passing it to a contingent beneficiary — sometimes used when a higher-income beneficiary wants the funds to go to someone in a lower bracket instead. This requires care and should involve an estate attorney.
Frequently asked questions
Do I have to take RMDs from an inherited IRA every year? Only if the person you inherited it from had already reached their Required Beginning Date (generally age 73) before they died. If they hadn't started their own RMDs yet, you can wait and withdraw the full balance any time before the end of year 10.
What happens if I miss an RMD on an inherited IRA? The IRS can impose an excise tax of 25% of the amount you should have withdrawn. That penalty drops to 10% if you correct the shortfall within two years.
Does the 10-year rule apply to Roth IRAs I inherit? Yes. You still must empty the account within 10 years, but there are no required annual withdrawals along the way, and qualified withdrawals are tax-free.
What if I'm the surviving spouse? You have more options than any other beneficiary type. You can roll the IRA into your own account and treat it as yours, or keep it as a separate inherited IRA and stretch withdrawals over your own life expectancy — with no 10-year deadline either way.
I inherited an IRA in 2020 or 2021 and didn't take any withdrawals. Am I in trouble? The IRS waived penalties for missed RMDs from 2021 through 2024 due to the regulatory uncertainty during that period. However, if annual RMDs apply to your situation, you were required to resume them starting with the 2025 distribution year.
A decision that's easy to get wrong — and costly to get wrong twice
The rules above cover the general framework, but where they apply to your specific inherited IRA depends on the original owner's age and RMD status at death, your relationship to them, the account type, and your own financial picture. Two beneficiaries with the same account balance can owe very different amounts in very different years.
At Halter Ferguson Financial, we work through inherited IRA decisions as part of a broader fiduciary financial plan — not as a one-off tax question. If you've recently inherited an IRA, or expect to, schedule a conversation with our team to map out a withdrawal strategy that fits your full financial picture.
This article is for general educational purposes and does not constitute individualized tax, legal, or investment advice. Inherited IRA rules are complex and fact-specific; consult a qualified financial advisor and tax professional about your particular situation.
Sources:
IRS, "Retirement Plan and IRA Required Minimum Distributions FAQs," irs.gov
IRS/Treasury Final Regulations on Required Minimum Distributions (T.D. 10001, issued July 2024)
SECURE 2.0 Act of 2022 (Division T, P.L. 117-328)
Vanguard, "Inherited IRA RMD Rules & SECURE Act 2.0"