Inherited IRAs and the 10-Year Rule: What Every Beneficiary Should Know

By Sara V. Solano, CRPC®, BFA™

 LodeStar Advisory Group LLC

A Changing Landscape for Inherited Retirement Accounts

Over the next decade, trillions of dollars will move from one generation to the next through retirement accounts—particularly IRAs. For many families, these transfers will mark the largest financial event of their lives. Yet few realize that the rules governing inherited IRAs have changed dramatically.

The SECURE Act of 2019, followed by further IRS regulations and the SECURE 2.0 Act of 2022, reshaped how beneficiaries must withdraw inherited assets. As of 2025, most non-spouse beneficiaries must now fully distribute inherited IRA balances within ten years of the original owner’s death.

The change may sound simple, but its implications are far-reaching. What was once a lifetime opportunity to stretch tax-deferred growth has become a compressed timeline that demands planning, precision, and patience.

Who the Rule Applies To

A non-spouse beneficiary is anyone who inherits an IRA from someone other than a spouse—adult children, grandchildren, siblings, relatives, or friends. Each beneficiary must open a new Inherited IRA and begin withdrawals under the rules that apply to their situation.

Under the ten-year rule:

• If the original owner passed away before reaching Required Minimum Distribution (RMD) age, beneficiaries may withdraw as they choose, provided the account is depleted by the end of Year Ten.

• If the original owner passed away after beginning RMDs, beneficiaries must continue taking annual RMDs in Years 1–9 and empty the account entirely by the end of Year Ten.

Certain eligible designated beneficiaries—such as surviving spouses, minor children, or those who are disabled, chronically ill, or less than ten years younger than the decedent—are still permitted to use the older “life expectancy” withdrawal method. But for most heirs, the ten-year rule now defines both pace and process.

Why Timing Matters

Every withdrawal from a traditional inherited IRA is taxed as ordinary income. Withdraw too much in a single year, and taxable income can spike—potentially pushing the beneficiary into a higher bracket. Withdraw too little, and a sudden end-of-period lump sum may do the same.

What was once an administrative detail has become a matter of tax strategy. Understanding how distributions intersect with salary, retirement income, or other investments is essential. Timing isn’t just about compliance; it’s about preserving value.

Common Missteps to Avoid

1. Delaying too long. Waiting until the tenth year can create avoidable tax compression.

2. Taking ad-hoc withdrawals. Irregular or impulsive distributions may disrupt long-term planning.

3. Overlooking RMD requirements. Beneficiaries of account owners who had begun RMDs must continue them annually.

4. Mixing inherited and personal IRAs. Doing so can result in unintended tax consequences.

5. Acting without guidance. Even well-intentioned decisions can trigger penalties if rules are misunderstood.

Each of these mistakes is preventable with information and intention.

A Framework for Clarity

Approach an inherited IRA the way you would any other major financial decision: with context and care.Ask yourself:

• How does this inheritance fit within my broader financial picture?

• What is my tax bracket today—and what might it be in future years?

• Do I understand the required deadlines and distribution options?

The answers may determine not just how much you receive, but how much you ultimately keep.

Looking Ahead

This article is the first in a three-part series on inherited IRAs.

In the next installment, we’ll explore strategies for managing withdrawals and tax brackets—turning compliance with the ten-year rule into an opportunity for long-term efficiency.

The third installment will focus on the behavioral side of inheritance: how mindset and patience influence financial outcomes.

Because even in matters governed by regulation, clarity and discipline remain the most enduring forms of wealth.

 _________________________________________________________________________________Sara V. Solano, CRPC®,  BFA™  is a Wealth Advisor who specializes in providing behavioral financial advice.

Disclosure: LodeStar Advisory Group LLC is an independent Registered Investment Adviser (RIA) headquartered in Naples, Florida. The above commentary does not constitute individual investment advice. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.