How to Handle Inherited IRAs Under the 10-Year Rule

Navigate the 10-year withdrawal rule for inherited IRAs with smart timing strategies to minimize taxes and maximize the money you keep.

1. Confirm you're subject to the 10-year rule. The 10-year rule applies to most non-spouse beneficiaries who inherited an IRA after 2019. You must withdraw all money within 10 years of the original owner's death. Spouses, minor children, disabled beneficiaries, and those within 10 years of the deceased's age have different rules.
2. Check if annual withdrawals are required. If the original owner had already started required minimum distributions (RMDs) before death, you must take annual withdrawals plus empty the account by year 10. If they hadn't started RMDs yet, you can withdraw nothing for 9 years and everything in year 10, or spread withdrawals however you want.
3. Map your current and future tax brackets. Traditional IRA withdrawals count as ordinary income and get taxed at your marginal rate. Look at your tax bracket now versus what you expect in coming years. If you're in a low bracket currently or expect higher income later, consider larger withdrawals sooner.
4. Plan withdrawal timing to minimize taxes. Spread large withdrawals across multiple years to avoid jumping tax brackets, or time them for low-income years. For example, if you're between jobs or taking unpaid leave, those might be ideal withdrawal years. Keep the money invested as long as possible while managing tax impact.
5. Set calendar reminders for the deadline. You must empty the account by December 31st of the 10th year after the owner's death. Missing this deadline triggers a 50% penalty on any remaining balance. Set multiple reminders starting in year 8 to avoid last-minute scrambling or costly mistakes.