Inheriting an IRA in 2026: The 10-Year Rule Explained

For decades, inheriting an IRA came with a powerful planning tool called the stretch IRA. Beneficiaries could take small, required distributions over their own lifetimes, allowing the bulk of the account to continue growing tax-deferred for many years. Then came the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, which fundamentally rewrote the rules for most people who inherit a retirement account.

Today, the inherited IRA 10-year rule governs the majority of non-spouse beneficiaries. And in 2025 and 2026, after years of IRS guidance delays, the full weight of those rules, including annual RMD requirements for certain beneficiaries, is now in force. If you've recently inherited an IRA, or expect to, understanding exactly what applies to your situation could be the difference between a manageable tax bill and an avoidable financial shock.

Under the 10-year rule, most non-spouse beneficiaries who inherited an IRA from someone who died after December 31, 2019, must withdraw the entire balance of the inherited IRA by December 31 of the tenth year following the original owner's death. There is no required annual withdrawal amount written into the rule itself, but the full balance must be at zero by that deadline.

For example, if the original account holder passed away in 2024, the inherited IRA must be fully distributed by December 31, 2034.

What many beneficiaries don't realize is that the 10-year rule has a critical nuance that the IRS clarified through proposed regulations and subsequent guidance. Whether annual RMDs are required within that 10-year window depends on when the original account owner died in relation to their Required Beginning Date (RBD).

• If the original owner died before their RBD: No annual RMDs are required during the 10-year window. Beneficiaries have flexibility to take distributions in any amount, in any year, as long as the account is empty by year 10.
• If the original owner died on or after their RBD: Annual RMDs must be taken each year within the 10-year window, based on the beneficiary's single life expectancy. The account must still be fully distributed by year 10 regardless.

The Required Beginning Date is generally April 1 of the year following the year the IRA owner turns 73 (as updated by the SECURE 2.0 Act). For most traditional IRA owners, this means annual distributions inside the 10-year window are required if they were already taking or were required to take RMDs at the time of their death. The IRS has confirmed this interpretation applies beginning with the 2025 distribution year, after waiving penalties during the transition period from 2021 through 2024.

Not everyone inheriting an IRA falls under the 10-year rule. The SECURE Act created a category called Eligible Designated Beneficiaries (EDBs), who may still take distributions over their own life expectancy, similar to the old stretch strategy. EDBs include:

• Surviving spouses: A surviving spouse has the most flexibility of any beneficiary. They can treat the inherited IRA as their own, roll it into their own IRA, or take distributions based on their own life expectancy. This is a significant planning advantage, particularly when there's a meaningful age gap between spouses.
• Minor children of the original account owner: Minor children (not grandchildren or other minor relatives) may use the life-expectancy stretch until they reach the age of majority. Once they reach that age under applicable state law (generally 18 or 21), the 10-year rule kicks in from that point.
• Disabled individuals: Those who meet the IRS definition of disabled may stretch distributions over their lifetime.
• Chronically ill individuals: Those meeting IRS criteria for chronic illness may also qualify for life-expectancy treatment.
• Individuals not more than 10 years younger than the deceased: A sibling, friend, or partner who is close in age to the original owner may qualify for the stretch.

All other beneficiaries, including adult children, grandchildren, and most non-spouse beneficiaries, are subject to the 10-year rule. Understanding which category you fall into is a critical first step when dealing with a non-spouse inherited IRA.

If you're navigating other financial complexities alongside an inheritance, such as managing a deceased spouse's accounts, the Widow and Widower Financial Checklist covers several intersecting issues that often arise during that first year.

One of the most practical aspects of the 10-year rule, for those without annual RMD requirements, is the ability to control the timing of taxable income. Inherited IRA distributions from a traditional IRA are taxed as ordinary income in the year they are received. Taking too much in a single year can push you into a significantly higher federal tax bracket, and potentially trigger other income-related consequences such as higher Medicare premiums through IRMAA.

Consider a hypothetical example for illustration purposes only:

Hypothetical Scenario: Suppose a 52-year-old named Dana inherits a traditional IRA worth $300,000 from a parent who died in 2024 and was under their RBD. Dana's regular annual income is $85,000. Under current 2026 federal tax brackets for a single filer, taxable income up to $47,150 is taxed at 22%, with the next bracket reaching to $100,525 at 22%, and amounts above that moving to 24%.

• Option A - Lump sum in year 10 (2034): Dana takes the full $300,000 (assuming no growth for simplicity) in a single year. Added to her $85,000 income, her total taxable income would be approximately $385,000, pushing a large portion of the distribution into the 32% and 35% federal tax brackets. The tax impact on just the IRA distribution could exceed $90,000 in federal income tax alone.
• Option B - Spread evenly over 10 years: Dana takes $30,000 per year. Combined with her $85,000 income, her annual taxable income is approximately $115,000. Most of the distribution sits in the 22% bracket. Total federal tax on the distributions over 10 years could be substantially lower, potentially saving tens of thousands of dollars compared to Option A.

This example is illustrative only and uses simplified assumptions. It does not account for account growth, changing tax laws, state income taxes, or individual circumstances. A qualified tax adviser can model scenarios specific to your situation.

The key insight is that the 10-year window is a planning opportunity, not just a deadline. Even if annual RMDs are not required, taking consistent, measured distributions throughout the window can be more tax-efficient than a large, late distribution. A related concern worth understanding is the IRMAA trap, since a spike in income from an inherited IRA distribution can affect Medicare premiums two years later.

The 10-year rule applies to both traditional and Roth inherited IRAs, but the tax treatment differs significantly.

With an inherited traditional IRA, every dollar withdrawn is generally taxable as ordinary income. This is why withdrawal timing is so consequential.

With an inherited Roth IRA, qualified distributions are typically tax-free, since contributions to a Roth are made with after-tax dollars and the account must have been open for at least five years. Non-spouse beneficiaries still must empty the account within 10 years, but because distributions are generally tax-free, the urgency to spread withdrawals for tax purposes is much lower. That said, leaving money in an inherited Roth IRA continues to grow tax-free, so some beneficiaries consider whether delaying withdrawals within the 10-year window makes sense for their overall financial picture.

It's also worth noting that inherited IRAs cannot be combined with your own IRA accounts. They must remain separate, titled correctly as an inherited IRA in the original owner's name for the benefit of the beneficiary. Rolling an inherited IRA into your own IRA is only permitted for surviving spouses.

The complexity of inherited IRA rules creates real opportunities for costly errors. Some of the most common mistakes include:

• Missing annual RMDs: Beneficiaries who inherited from someone past their RBD may be required to take annual distributions beginning in 2025. Missing these distributions triggers a 25% excise tax on the amount that should have been withdrawn (reduced to 10% if corrected promptly under IRS rules updated by SECURE 2.0). The IRS waived penalties for missed annual RMDs from 2021 through 2024 due to the transition period, but that grace period has ended.
• Taking a lump sum without a tax plan: The temptation to take the full balance at once is understandable, but the tax consequences, as illustrated above, can be significant.
• Assuming the old stretch rules still apply: Some beneficiaries who inherited before January 1, 2020, may still be using old life-expectancy rules under transition relief. Those who inherited after that date generally cannot use the stretch strategy.
• Commingling funds: Depositing inherited IRA distributions into your own IRA or treating the inherited account as your own (unless you are a surviving spouse) is not permitted and can trigger immediate taxation and penalties.
• Failing to designate a successor beneficiary: If you are taking distributions from an inherited IRA and you pass away before the 10-year period ends, having a successor beneficiary designated helps ensure the account transfers smoothly.

Staying organized about the tax implications of inherited assets is one of several reasons financial planning after a major life event matters so much. For those managing broader estate-related financial transitions, understanding how Qualified Charitable Distributions work may also be relevant if the inherited account has charitable giving potential.

Navigating an inherited IRA involves several important considerations in roughly this order:

1. Confirm the account type and date of death. Determine whether the account is a traditional or Roth IRA, and whether the original owner died before or after their Required Beginning Date. This determines whether annual RMDs apply within the 10-year window.
2. Determine your beneficiary category. Establish whether you qualify as an Eligible Designated Beneficiary, which may allow life-expectancy distributions, or whether the 10-year rule applies to you as a non-spouse, non-EDB beneficiary.
3. Retitle the account correctly. The account must be titled in a specific format such as: "[Deceased Owner's Name], deceased [date], IRA FBO [Your Name], Beneficiary." The financial institution holding the account can guide this process, but getting the title right matters for IRS purposes.
4. Calculate any annual RMD obligations. If the original owner died after their RBD, work with a tax professional to determine your annual distribution requirement using the IRS Single Life Expectancy Table (Table I in IRS Publication 590-B).
5. Model the tax impact of different distribution schedules. A tax adviser or financial planner can run projections showing how different withdrawal timelines affect your overall federal and state tax liability over the 10-year period.
6. Consider the broader income picture. Inherited IRA distributions interact with Social Security taxation, Medicare premiums, and other income sources. Understanding how the Social Security tax torpedo works may be relevant if you're also receiving Social Security benefits during the drawdown period.
7. Consult a qualified tax professional. Given the penalty risks and the complexity of these rules, working with a CPA or enrolled agent who understands inherited IRA regulations is strongly advisable before taking any distributions.

Disclaimer: The information in this article is for general educational purposes only and does not constitute personalised financial, tax, or legal advice. Inherited IRA rules are complex and the consequences of errors can be significant. Every individual's situation is different. Readers are strongly encouraged to consult a qualified financial adviser, CPA, or tax attorney before making any decisions about an inherited retirement account.