Inherited an IRA? The 10-Year Rule Doesn’t Mean You Can Wait 10 Years to Think About Taxes

An inherited IRA can give many beneficiaries up to 10 years to empty the account, but that does not necessarily give them 10 years to ignore the tax consequences. The IRS sets a deadline for getting the money out, while your own income, withdrawals, and tax situation determine what those distributions may cost along the way.

That matters because a traditional inherited IRA can turn into taxable income when money comes out. A beneficiary who treats the 10-year period like a decade-long pause button could face a particularly unpleasant tax problem near the finish line. The account may still be growing, the deadline may still look comfortably distant, and then suddenly the calendar gets much less friendly.

Ten Years Is a Deadline, Not Necessarily a Schedule

For many non-spouse beneficiaries who inherited an IRA after 2019, the SECURE Act’s 10-year rule requires the entire account balance to leave the IRA by December 31 of the 10th year after the owner’s death. If the owner died in 2025, for example, the account generally must be emptied by December 31, 2035.

That rule creates an easy misconception: “There are 10 years, so there is no reason to withdraw anything until Year 10.” Sometimes that approach can work under the rules, particularly when the original owner died before their required beginning date and the 10-year rule applies without annual distributions. But other inherited IRA situations require annual distributions before the 10-year deadline arrives.

The owner’s age and the beneficiary’s status matter. So does whether the beneficiary qualifies as an eligible designated beneficiary, such as a surviving spouse, a minor child, a disabled or chronically ill person, or someone who is not more than 10 years younger than the deceased owner. Those categories can produce different distribution rules.

The Tax Bill Can Depend on When the Money Leaves

Traditional IRA distributions generally count as taxable income in the year the beneficiary receives them, subject to the usual rules and exceptions. That makes timing more than an administrative detail. It can change how much income lands on the beneficiary’s tax return in a particular year.

Consider a simple hypothetical. Someone inherits a sizable traditional IRA while working full time and earning a comfortable salary. Pulling a large amount from the inherited account during those high-income years could stack additional taxable income on top of existing earnings. Years later, that same person might retire and have considerably less taxable income.

The 10-year window can therefore create opportunities for smaller distributions across multiple years, rather than one giant withdrawal at the end. It does not guarantee a lower tax bill, because future income, tax laws, investment performance, and personal circumstances can all change. But it gives the beneficiary something valuable: time to make decisions instead of letting the deadline make them.

There is a particularly important wrinkle after the owner’s RMD date

The owner’s required beginning date can change the rules dramatically. For an IRA owner, that generally starts with the year they reach age 73 under current federal rules.

If the owner died after reaching that required beginning date and a non-eligible designated beneficiary falls under the 10-year rule, annual required minimum distributions can apply during the 10-year period. The beneficiary generally bases those annual RMDs on applicable life-expectancy rules, while also facing the requirement to completely distribute the account within the 10-year window.

That is why simply writing “10 years” on a calendar can be misleading. A beneficiary may have both an annual withdrawal obligation and a final deadline. The IRS finalized regulations that apply to these RMD rules for calendar years beginning in 2025, so older articles and advice can leave out details that matter now.

Roth and Traditional Inherited IRAs Do Not Behave the Same Way

The tax conversation also depends heavily on what kind of IRA was inherited. A traditional IRA generally produces taxable income when the beneficiary takes taxable distributions. An inherited Roth IRA follows different tax treatment, although beneficiaries still face distribution rules and the account’s five-year history can matter for earnings.

That difference can make an inherited Roth considerably less painful from an income-tax perspective. It does not make the account a free-for-all, however. Beneficiaries still need to follow the applicable distribution timetable, and Roth beneficiaries can face rules that differ depending on when the original account owner established the Roth.

The label on the statement therefore matters. “Inherited IRA” tells only part of the story. Before deciding how quickly to withdraw the money, a beneficiary needs to know whether the account is traditional or Roth, when the owner died, whether the owner had reached the required beginning date, and what beneficiary category applies.

A Calendar Can Be More Useful than A Calculator

Beneficiaries do not necessarily need a complicated spreadsheet to start thinking clearly about an inherited IRA. A basic timeline can reveal the decisions that deserve attention.

First, identify the year of death and the final year of the 10-year window. Then determine whether annual RMDs apply. After that, look at the beneficiary’s expected income for the coming years. A year with unusually low income, a planned retirement, or another major financial change could affect the attractiveness of taking a larger distribution.

The goal does not involve predicting the future perfectly. Nobody gets that luxury. It means avoiding the especially awkward strategy of waiting until the deadline is staring directly at the calendar and discovering that the remaining balance creates a much larger taxable distribution than expected.

The Smartest Move May Happen Long Before Year 10

The 10-year rule gives beneficiaries time, but time works best when someone actually uses it. Spreading taxable withdrawals across several years may make more sense than allowing the inherited IRA to grow untouched and then scrambling to empty it before the deadline. The right approach depends on the account type, applicable RMD rules, other income, tax situation, and the beneficiary’s broader financial circumstances.

There is also no universal rule that says a beneficiary should withdraw the same amount every year. Some people may prefer relatively even distributions, while others may have years when taking more or less makes sense. The IRS rules establish the boundaries; the beneficiary’s circumstances determine what happens inside those boundaries.

The Inheritance Comes with A Calendar Attached

An inherited IRA can feel like a gift that comes with plenty of breathing room. In reality, the clock starts running as soon as the original owner’s death triggers the applicable beneficiary rules.

The most useful question may not be, “How many years do I have left?” It may be, “Which years could make sense for taxable withdrawals?” That small change in perspective can turn a distant deadline into a manageable planning timeline, rather than a nasty tax surprise waiting in the tenth year.

How would you approach an inherited IRA: spread the withdrawals out, or wait as long as the rules allow?