Key inherited IRA rule: Most non-spouse beneficiaries must withdraw the account within 10 years, and traditional inherited IRA withdrawals are generally taxed as ordinary income.
Because traditional inherited IRA distributions are generally taxed as ordinary income, taking large withdrawals too quickly can create significant and avoidable tax consequences.
Inherited IRAs are one of the most misunderstood assets in retirement planning. The rules changed under the SECURE Act, and many beneficiaries still do not realize that the 10-year deadline, annual withdrawal requirements, and tax consequences can affect how much of the inheritance they ultimately keep.
Bottom line: If you inherited an IRA, the goal is not just to take the money out. The goal is to understand the rules, avoid preventable tax mistakes, and coordinate withdrawals with your broader financial plan.
Who This Guide Is For
This guide focuses primarily on non-spouse beneficiaries, which is the most common scenario when adult children inherit retirement accounts from parents. Surviving spouses often have additional options, including the ability to treat the account as their own IRA.
Inherited IRA Quick Answers
| Question |
Short Answer |
| What is an inherited IRA? |
An inherited IRA is a retirement account passed to a beneficiary after the original owner dies. |
| Who must follow the inherited IRA 10-year rule? |
Most non-spouse beneficiaries who inherited an IRA after 2019 must withdraw the account within 10 years. |
| Are inherited IRA withdrawals taxable? |
Withdrawals from inherited traditional IRAs are generally taxed as ordinary income. |
| Are inherited Roth IRA withdrawals taxable? |
Qualified withdrawals from inherited Roth IRAs are generally tax-free if the 5-year requirement is satisfied. |
| Is there a 10 percent early withdrawal penalty? |
No. The early withdrawal penalty does not apply to inherited IRA distributions. |
| Can a non-spouse beneficiary convert an inherited IRA to a Roth IRA? |
No. Non-spouse beneficiaries generally cannot convert inherited IRA assets to a Roth IRA. |
If you recently inherited an IRA and want to understand the rules in more detail, you may also want to review these short videos on:
the most common inherited IRA tax mistake,
how the inherited IRA 10-year rule works, and
the inherited IRA rules every Gen Xer should understand.
What Is an Inherited IRA?
An inherited IRA is a retirement account passed to a beneficiary after the original owner dies. The rules depend on who inherited it, whether the original owner had already started required minimum distributions, and whether the beneficiary is a spouse, a non-spouse, or another type of beneficiary.
| Key Concept |
What It Means |
| Inherited IRA |
A retirement account passed to a beneficiary after the original owner dies. |
| Non-spouse beneficiary |
Most adult children who inherit an IRA from a parent fall into this category and usually must follow the 10-year withdrawal rule. |
| Required Minimum Distributions (RMDs) |
Mandatory withdrawals that may still apply if the original IRA owner had already started taking required distributions before passing away. |
| Traditional vs. Roth inherited IRA |
Withdrawals from inherited traditional IRAs are generally taxable as ordinary income, while qualified withdrawals from inherited Roth IRAs are usually tax-free. |
| 10-year withdrawal deadline |
Most non-spouse beneficiaries must fully withdraw the inherited IRA by the end of the tenth year after the original owner's death. |
Inherited IRA 10-Year Rule: Who Must Withdraw the Account and When
For many non-spouse beneficiaries, the inherited IRA must be fully distributed by the end of the tenth year after the original owner's death. That is the broad rule most people hear about. What many beneficiaries miss is that in some cases they may also need to take annual distributions before year ten.
Important nuance: If the original owner died after beginning required minimum distributions, annual withdrawals may apply during years 1 through 9, and the account still must be emptied by the end of year 10.
| Scenario |
What Usually Applies |
| Original owner died before starting RMDs |
Most non-spouse beneficiaries must empty the account by the end of year 10. Timing during those years may be more flexible. |
| Original owner died after starting RMDs |
Annual distributions may be required in years 1 through 9, and the balance still must be fully withdrawn by the end of year 10. |
| Surviving spouse |
Spouses generally have more flexibility than non-spouse beneficiaries. |
The 3 Questions That Determine Most Inherited IRA Rules
- Who inherited the IRA?
- Had the original owner already started required minimum distributions?
- What year does the 10-year deadline land?
Those three answers drive most of the planning decisions that follow. They determine timing, flexibility, and whether annual withdrawals may apply.
Do You Pay Taxes on an Inherited IRA?
Traditional inherited IRA withdrawals are generally taxed as ordinary income. That means a large distribution can push you into a higher tax bracket, increase the tax drag on the inheritance, and potentially affect other areas of your financial life.
Because inherited IRA withdrawals are generally taxed as ordinary income, many beneficiaries benefit from coordinating withdrawals with a broader tax planning strategy.
| Tax Question |
Answer |
| Is there a 10 percent early withdrawal penalty? |
No. Inherited IRA withdrawals generally are not subject to the early withdrawal penalty. |
| Is the withdrawal still taxable? |
Yes. Traditional inherited IRA distributions are generally taxed as ordinary income. |
| Can you move the money to your bank account without consequences? |
No. Once funds leave the inherited IRA, the distribution is generally taxable. |
| Can a non-spouse beneficiary convert an inherited IRA to a Roth IRA? |
Generally no. |
Tax planning matters: The mistake is often not taking money. The mistake is taking too much in one year, or taking it without a tax-aware strategy.
The Most Common Inherited IRA Mistakes
- Cashing out the entire account at once and creating a large tax bill.
- Waiting until year 10 and trying to deal with it later.
- Assuming non-spouse beneficiaries can do a Roth conversion.
- Ignoring possible annual withdrawal requirements.
- Forgetting to plan for tax withholding.
- Treating the inherited IRA as a standalone decision instead of part of a broader financial plan.
Smarter Withdrawal Strategies for Beneficiaries
A better approach is often to open the inherited IRA correctly, keep the assets invested if appropriate, and create a multi-year withdrawal plan that coordinates distributions with your income. The goal is not to avoid taxes entirely. It is to manage them intelligently.
| Approach |
Potential Result |
| Take the full balance in one year |
Higher taxable income, possible jump in tax bracket, and a larger immediate tax bill. |
| Spread withdrawals across several years |
More control over taxable income and potentially lower total tax drag. |
| Wait until year 10 without a plan |
Risk of a large final-year tax hit and missed planning opportunities. |
| Coordinate withdrawals with annual income |
More intentional tax planning and fewer surprises. |
What To Do in the First 30 Days After Inheriting an IRA
- Make sure the account is titled correctly as an inherited IRA.
- Call the custodian and confirm which rules apply to you.
- Ask whether the original owner had started required minimum distributions.
- Ask whether you personally have an annual withdrawal requirement.
- Identify your year-10 deadline now, not later.
- Create a simple tax-aware withdrawal plan before moving money.
Planning tip: If a large withdrawal already happened, you may not be able to reverse it. But strategies such as maximizing retirement plan contributions, funding an HSA if eligible, using donor-advised giving, harvesting losses, or coordinating deductions may help soften the impact in a high-income year.
How Inherited IRAs Fit Into Your Bigger Picture
Inherited IRAs do not exist in isolation. They can affect your tax bracket, the timing of retirement decisions, investment planning, and how coordinated your overall financial life feels. That is why inherited IRA planning is not just about deadlines. It is about integrating tax strategy, withdrawal timing, and long-term planning.
Watch Our Inherited IRA Videos
Frequently Asked Questions
How long do you have to withdraw an inherited IRA?
Most non-spouse beneficiaries generally must empty the account by the end of the tenth year after the original owner's death.
Do inherited IRAs require annual withdrawals?
Sometimes. If the original owner died after beginning required minimum distributions, annual withdrawals may also apply during years 1 through 9.
Do you pay taxes on inherited IRA withdrawals?
Traditional inherited IRA withdrawals are generally taxed as ordinary income. Inherited Roth IRA withdrawals are generally tax-free if qualified.
Can a non-spouse beneficiary convert an inherited IRA to a Roth IRA?
Generally no. Non-spouse beneficiaries typically cannot convert inherited IRA assets to a Roth IRA.
What is the biggest inherited IRA mistake?
One of the biggest mistakes is withdrawing the entire account at once, which can create an avoidable and very large tax bill.
What should you do first after inheriting an IRA?
Get clarity before taking action. Confirm how the account should be titled, which distribution rules apply, when the deadline is, and how withdrawals will affect your taxes.
.png)
.jpeg)
