The inherited IRA 10-year rule requires most non-spouse beneficiaries to empty the account by December 31 of the tenth year after the original owner's death. If that owner had already reached their required beginning date for RMDs before they died, the beneficiary also has to take a required minimum distribution every year in years one through nine, not just drain the account at the end of year ten. For 2021 through 2024, the IRS waived the penalty for skipping those annual RMDs while it finalized the regulations. That waiver has now expired. Starting with the 2025 tax year, missing one of these RMDs triggers a real excise tax of up to 25% of the amount you should have withdrawn, and 2026 is the first full year beneficiaries are living with that penalty actually enforced.
What Is the Inherited IRA 10-Year Rule, Exactly?
Under the original SECURE Act, most non-spouse beneficiaries who inherit an IRA from someone who died after December 31, 2019 can no longer "stretch" distributions over their own lifetime the way beneficiaries could before 2020. Instead, the entire account has to be emptied by the end of the tenth calendar year following the year of death. Inherit in 2023, and the account has to hit zero by December 31, 2033. The rule applies to inherited traditional IRAs, inherited Roth IRAs, and most inherited 401(k) and 403(b) balances rolled into an inherited IRA.
Do You Have to Take an RMD Every Year, or Just Empty the Account by Year 10?
It depends entirely on whether the original owner died before or after their required beginning date, which is April 1 of the year after they turned 73. If the owner died on or after that date, meaning they had already started their own RMDs, the beneficiary must take annual RMDs in years one through nine based on their own life expectancy, then clear whatever is left by the end of year ten. If the owner died before their required beginning date, no annual RMDs are required at all during the ten-year window. You can leave the account untouched for nine years and withdraw everything in year ten, spread it evenly, or take it out however you want, as long as it's fully gone by the deadline. One exception worth knowing: inherited Roth IRAs never carry the annual-RMD requirement inside the ten-year window, because Roth owners never have a required beginning date in the first place. A Roth beneficiary still has to zero out the account by year ten, they just never owe an annual RMD along the way.
What Actually Changed for 2025 and 2026?
The IRS finalized the regulations implementing this version of the 10-year rule on July 19, 2024, confirming that annual RMDs are required in years one through nine when the original owner died past their required beginning date. But because the rule had been genuinely unclear for years, the IRS issued Notices 2022-53, 2023-54, and 2024-35, waiving the penalty for missed annual RMDs for tax years 2021 through 2024. That grace period is over. Annual RMDs inside the 10-year window are now enforced starting with the 2025 tax year, which means anyone who skipped a required distribution in 2025 is already exposed to the penalty, and 2026 is the first year beneficiaries are expected to simply comply on schedule with no waiver sitting underneath them as a safety net.
How Much Does Missing an Inherited IRA RMD Actually Cost You?
Say you inherited a $500,000 traditional IRA from a parent in 2023, and your parent had already been taking RMDs at the time they died. You turn 50 in 2025, and the account was worth $500,000 as of December 31, 2024. The IRS Single Life Expectancy Table gives a beneficiary who is 50 a life expectancy factor of 36.2. Your 2025 RMD is $500,000 divided by 36.2, or $13,812. If you miss it entirely, the base excise tax is 25% of that shortfall, or $3,453, owed on top of the income tax you'll eventually pay when the money does come out. That penalty resets every year you're out of compliance, on whatever the shortfall was for that specific year, so a beneficiary who ignores the annual requirement for multiple years in a row isn't looking at one penalty, they're looking at one for each year missed.
Is There Any Way to Reduce the Penalty If You Already Missed One?
Yes. SECURE 2.0 cut the excise tax from its old 50% rate down to 25% starting with the 2023 tax year, and it added a further reduction to 10% if you correct the missed distribution inside the IRS's "correction window," generally within two years of the year the shortfall occurred, and you file a return reporting the excise tax during that window. In the example above, correcting the missed $13,812 RMD inside that window drops the penalty from $3,453 to $1,381. The move if you've missed one is straightforward: take the missed distribution as soon as you realize the mistake, file Form 5329 to report and pay the excise tax, and attach a letter requesting the penalty be waived or reduced if the shortfall was a reasonable error you're actively fixing. The IRS has shown some willingness to waive the penalty entirely for beneficiaries who self-correct quickly, though nothing about that outcome is guaranteed.
Who Is Exempt From the 10-Year Rule?
A category called "eligible designated beneficiaries" gets to skip the 10-year rule and stretch distributions over their own life expectancy instead, the way beneficiaries generally could before 2020. That group includes a surviving spouse, a minor child of the original owner (though the 10-year clock starts once that child turns 21), a disabled or chronically ill beneficiary, and anyone who is not more than 10 years younger than the original owner. If you fall into one of these categories, the annual excise tax exposure described above doesn't disappear, since you still owe an RMD every year, but the underlying math and timeline are different from the 10-year rule this article covers.
What Should You Do Right Now If You Have an Inherited IRA?
Confirm three things with your IRA custodian: the exact date the original owner died, whether they had reached their required beginning date at death, and whether you've actually taken every annual RMD you owed for 2025 and any prior non-waived year. If you're missing one, correct it now rather than waiting for the IRS to notice, since the correction window that gets you the reduced 10% rate is only open for a limited time after the shortfall occurs. If you're still unclear on how the required beginning date itself works, our breakdown of the RMD age rules under SECURE 2.0 covers exactly when an account owner's own RMDs kick in, which is the fact that decides everything else in this article. And if the account you inherited was a Roth rather than a traditional IRA, our Roth vs. traditional IRA comparison covers why the tax treatment on the way in changes what you actually owe on the way out.
What Are the Real Risks and Trade-Offs?
- The penalty resets every year you're out of compliance. A missed RMD isn't a one-time mistake financially, it's a new excise tax calculated on that specific year's shortfall, year after year, until it's corrected.
- Waiting until year ten to take everything at once can push you into a higher tax bracket. Even when annual RMDs aren't required, dumping ten years of a large inherited balance into a single year of ordinary income can cost more in income tax than spreading it out would have, even with no annual RMD obligation forcing your hand.
- The correction window has a real deadline. The reduced 10% penalty rate isn't available forever after you miss a distribution, so the value of correcting quickly goes down the longer you wait.
- Custodians don't always calculate this for you. Some brokerages will flag your RMD; others won't, especially on inherited accounts, so the responsibility to know your own required beginning date facts falls on the beneficiary, not the platform holding the money.
- Getting eligible designated beneficiary status wrong has real consequences. Misjudging whether you qualify for the life-expectancy stretch instead of the 10-year rule can mean under-withdrawing for years before the mistake surfaces.
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