If you inherit an IRA from anyone other than your spouse, you almost certainly have to empty the entire account within 10 years of the original owner’s death. The old “stretch IRA,” where you could spread withdrawals across your own lifetime, is gone for most beneficiaries. And starting in 2025, there’s a second layer: if the person who died was already taking required minimum distributions, you also have to take an RMD in each of years one through nine, then clear out whatever is left by December 31 of year ten.
From the Retirement Tax Planning hub — Evergreen Wealth Management — proactive year-round tax planning for retirees: Roth conversions, withdrawal sequencing, and Medicare IRMAA strategy.
I’ve had this conversation many times over the past two years. Someone in their mid-fifties, still in their peak earning years, calls to say a parent left them a seven-figure IRA. They expect congratulations. Instead I ask what year the parent turned 73.
What exactly is the inherited IRA 10-year rule?
The 10-year rule says that most non-spouse beneficiaries must fully distribute an inherited IRA by December 31 of the tenth year after the original owner’s death. It came from the SECURE Act and applies to owners who died after December 31, 2019.
Before that law, an adult child who inherited a $1 million IRA at 50 could stretch withdrawals over roughly 34 years while the rest compounded tax-deferred. Congress ended that, pulling decades of deferred tax forward onto people usually at the highest income of their lives.
One clarification that trips people up: the deadline is the end of the tenth calendar year, not the tenth anniversary of the death. If your father died in March 2026, the account must be at zero by December 31, 2036.
Do I have to take annual withdrawals during the 10 years?
It depends on whether the original owner had already reached their required beginning date — April 1 of the year after they turn 73 under current law. If they had, yes: you must take an annual RMD in years one through nine and empty the account by year ten. If they died before that date, you can take nothing until the deadline. The rough test is whether the person who died was old enough to have started RMDs. Died at 78? Almost certainly yes. Died at 68? No.
This piece confused everyone, including the IRS, for four years. The agency waived the penalty for missed annual RMDs from 2021 through 2024 while it finalized the regulations; 2025 was the first year beneficiaries were actually on the hook. The penalty for missing one is 25% of the amount you should have taken, dropping to 10% if you fix it within two years. The IRS lays out the mechanics in its guidance on required minimum distributions for IRA beneficiaries.
Hear this part clearly: the annual RMD is almost never the number you should actually withdraw. It’s a floor, not a plan. In year one it’s often only 2% or 3% of the balance — take exactly the RMD for nine years and you’ll still be staring at 70% or more of the account in year ten.
Who is exempt from the 10-year rule?
Five categories of “eligible designated beneficiary” can still stretch distributions over their own life expectancy. Everyone else gets ten years.
| Beneficiary | What they can do |
|---|---|
| Surviving spouse | Best option: roll it into their own IRA and treat it as their own. No 10-year clock at all. |
| Minor child of the owner | Life expectancy payments until age 21 — then the 10-year clock starts. A grandchild does not qualify. |
| Disabled beneficiary | Life expectancy, using the IRS definition of disabled. |
| Chronically ill beneficiary | Life expectancy, with certification requirements. |
| Anyone not more than 10 years younger than the owner | Life expectancy. Often a sibling or a partner close in age. |
Note the second row. Many people assume leaving an IRA to a grandchild buys decades of deferral. It doesn’t — the minor-child exception covers only the owner’s own children, and even then it converts to the 10-year rule at 21. Full definitions live in IRS Publication 590-B.
What does the 10-year rule actually cost in taxes?
The cost is all about timing, and the spread between a good schedule and a bad one is enormous. Waiting until year ten and taking one giant distribution is the most expensive way to handle an inherited IRA — and the most common.
A married couple in Massachusetts, both 55 and working, with $220,000 of combined wages. One inherits a $1.2 million traditional IRA from a parent who died at 78. Assume 6% annual growth.
| Wait, then empty it in year 10 | Spread it evenly over 10 years | |
|---|---|---|
| Total withdrawn | ~$2,149,000 in one year | ~$163,000 per year, ~$1,630,000 total |
| Top federal bracket reached | 37% | 24% |
| Federal tax on the inherited dollars | ~$756,000 | ~$389,000 |
| Massachusetts income tax (5%) | ~$107,000 | ~$82,000 |
| Massachusetts 4% surtax | ~$51,000 | $0 |
| Effective tax rate on the inherited dollars | ~43% | ~29% |
Be fair about what this table shows. The wait-until-year-ten column withdraws more total dollars, because the balance kept compounding tax-deferred, and that deferral has real value. So read the bottom row, not the raw tax figures: roughly 43 cents on the dollar versus 29 cents. Fourteen percentage points on a seven-figure account is worth planning around.
Notice the surtax line. Massachusetts adds 4% on taxable income above $1,083,150 on top of its flat 5% rate, and a one-year IRA liquidation is one of the fastest ways an ordinary household blows through that threshold. Same story with Medicare: if the beneficiary is 63 or older, a spike year raises their IRMAA surcharge two years later.
Does the 10-year rule work differently for an inherited Roth IRA?
Yes, and it’s the one piece of good news here. An inherited Roth IRA is still subject to the 10-year rule, but there are no annual RMDs during those years, because Roth owners never had a required beginning date.
Better still, qualified distributions from an inherited Roth are generally tax-free as long as the account had been open at least five years. So the strategy flips: with an inherited traditional IRA you usually spread withdrawals out; with an inherited Roth you usually let it compound untouched for the full ten years and take it all at the end.
This is a big reason I discuss Roth conversions in retirement in terms of clients’ children, not just themselves. A retiree in the 22% bracket who converts steadily in their sixties may be paying 22% to spare their kids from paying 32% or 35% on the same dollars a decade later — a wash on their own return, a clear win on the family’s.
How should Massachusetts families plan for this?
Plan from both sides — as the person who will leave the IRA, and as the person who will inherit it.
If you’re the owner, the questions are whether to convert to Roth during your low-income years, whether to name a charity as beneficiary for part of the IRA, and how the account interacts with the Massachusetts estate tax. That last one catches families off guard: the state exemption is only $2 million and it isn’t portable between spouses — a detail I walk through in the Massachusetts estate tax $2M cliff. A $1.5 million IRA plus a $1.8 million house in Newton clears that line without anyone feeling wealthy. Mass.gov publishes the details in its estate tax guide.
If you’re the heir, build the ten-year schedule in year one, before you spend a dollar. The best question: which of these ten years will I be in a lower bracket? If you’re 55 and retiring at 62, years seven through ten are the cheap ones — take less early, more later. If a business sale or big vesting event is coming, front-load now. Revisit annually.
One practical note: never move an inherited IRA by writing yourself a check. It has to be a direct trustee-to-trustee transfer into a properly titled inherited IRA. A non-spouse beneficiary cannot do a 60-day rollover, and the mistake is irreversible — the whole account becomes taxable immediately. Retitling also shapes how the assets get invested, part of our investment management work.
How a flat fee changes the math on this kind of planning
Worth naming plainly: under the 1% AUM model, an advisor gets paid more when your balance is bigger. Inherited IRA planning frequently means telling a client to pull money out faster than required — shrinking the balance the advisor is paid on. That’s a real conflict, and it doesn’t vanish because the advisor is a fiduciary and means well.
Evergreen Wealth Management charges a flat monthly fee regardless of portfolio size. If you inherit a $1.2 million IRA tomorrow, our fee does not move. A 1% AUM advisor’s fee would rise by $12,000 a year on that same account, more than our entire annual fee. And when the right advice is “distribute $163,000 this year even though you don’t need the money,” we have no financial reason to hesitate. See how we price it on our fee structure page, or read more about my background on our about page.
Frequently Asked Questions
Can I take the inherited IRA out gradually and just pay the tax as I go?
Yes, and for a traditional inherited IRA that’s usually the right answer. There’s no penalty for taking more than the annual RMD, and no early withdrawal penalty on inherited IRA distributions at any age. The only hard requirement is that the balance hits zero by December 31 of the tenth year following the death.
What happens if I inherited an IRA in 2021 and never took anything out?
You’re probably fine on the missed years. The IRS waived the annual RMD penalty for 2021 through 2024 while the regulations were unsettled, so those don’t need to be made up. But 2025 forward counts, and your ten-year deadline still runs from the original date of death — so you now have fewer years to spread the income over.
Does Evergreen charge more to manage an inherited IRA?
No. Evergreen Wealth Management is a fee-only fiduciary firm in Boston with one price: a flat monthly fee, whether we’re planning around $800,000 or $8 million. An inherited IRA adds real work — a ten-year distribution schedule, coordination with your tax preparer, and annual revisions as your income changes — but it doesn’t change what you pay.
Because inherited Roth money can generally come out tax-free during the 10-year window, high earners who are shut out of direct Roth contributions sometimes build those balances through backdoor and mega backdoor Roth contributions while they are still working.
The bottom line
The inherited IRA 10-year rule turned a slow-drip tax bill into a compressed one aimed at people in their peak earning years. You can’t opt out. What you can control is the schedule — and the difference between a thoughtful ten-year plan and a year-ten panic withdrawal is roughly 14 percentage points of tax on the entire account.
If you’ve inherited an IRA, or you’ll eventually leave one to your children, the planning is worth doing early. I’m happy to walk through the numbers — see what working together looks like on our becoming a client page.
Nick Stevens, CFP® is the founder of Evergreen Wealth Management in Boston, a flat-fee financial planning and investment management firm. Evergreen charges a fixed monthly fee regardless of portfolio size. Learn more about how we work at /fee-structure/ or get in touch at /contact-us/.
Educational only, not individualized tax or legal advice. Tax figures cited are 2026 amounts. Consult your tax professional or estate attorney about your situation.