Inheriting a parent’s individual retirement account used to be a slow, tax-friendly gift. An adult child could draw the money out gradually over decades, taking only a sliver each year and letting the rest keep growing. That era is largely over. For most people who now inherit an IRA, the account has to be fully emptied within ten years — and cramming a lifetime of someone else’s savings into a single decade can land an heir with a tax bill far larger than the old rules ever produced.
The end of the stretch IRA
The generous approach heirs relied on for years was known as the “stretch IRA.” A non-spouse beneficiary could base withdrawals on their own life expectancy, spreading the taxable income across the rest of their life and leaving the bulk of the account invested and compounding. For a younger heir, that could mean small, manageable distributions stretching thirty or forty years into the future, with only a modest amount taxed in any single year.
A 2019 law closed that door for most beneficiaries. Under the IRS rules on required minimum distributions for IRA beneficiaries, most people who inherit an account from an owner who died after 2019 must withdraw the entire balance by the end of the tenth year following the death. The account can still grow while it is held, and heirs have some freedom over the timing within that window, but at the ten-year mark it has to be empty. The change did not shrink the tax owed on the money — it compressed the schedule for paying it.
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When yearly withdrawals are required too
The ten-year deadline is not always the only requirement. The IRS guidance on required minimum distributions draws a line based on whether the original owner had already reached the age at which their own withdrawals had to begin. If the owner died before that point, a beneficiary can generally wait and take the whole balance at any pace, as long as it is gone by year ten. But if the owner had already started taking required distributions, the heir must also take an annual withdrawal in each of years one through nine — and still clear the account by the end of year ten. Because the rules were unsettled for several years, the IRS waived penalties for missed annual distributions in the early 2020s while it finalized the regulations; those annual withdrawals are now firmly in effect. An heir who assumed the only deadline was the tenth year could otherwise face a penalty for skipping the interim distributions.
The tax squeeze
The reason the ten-year rule stings is that money coming out of an inherited traditional IRA is taxed as ordinary income to the heir, at the heir’s own tax rates. Publication 590-B, the IRS guide to distributions from IRAs, lays out how those withdrawals are reported and taxed. The trouble is timing: many people inherit an account in their forties, fifties, or early sixties — often their peak earning years — and stacking a large inherited balance on top of an already-high salary can push that income into higher brackets. A beneficiary who waits until the final year and pulls a six-figure account out all at once can see a big chunk vanish to taxes, a hit the old stretch rules would have spread thin across decades. Spreading withdrawals evenly across the ten years, rather than bunching them, is often the difference between a manageable increase and a bracket-jumping spike.
The stakes rise with the size of the account. Retirement balances have swelled over the decades, and it is no longer unusual for a long-time saver to leave behind a mid-six-figure IRA. Spread across an heir’s own life expectancy under the old rules, that could have meant modest annual income; concentrated into ten years, the same balance can add tens of thousands of dollars to taxable income every year — or far more if the heir delays and empties it in a rush. State income taxes can compound the federal hit in many places, and the extra income can quietly raise other income-linked costs, from the taxation of an already-retired heir’s own Social Security to Medicare premium surcharges.
Who still gets a break
Not everyone is bound by the ten-year clock. The rules preserve gentler treatment for a category the IRS calls eligible designated beneficiaries. A surviving spouse has the most options, including treating the inherited IRA as their own. A minor child of the account owner can wait until reaching adulthood before the ten-year period begins. Beneficiaries who are disabled or chronically ill, and heirs who are not more than ten years younger than the person who died, may also still stretch withdrawals over their life expectancy. Inherited Roth IRAs generally fall under the same ten-year emptying requirement for non-spouse heirs, but because qualified Roth withdrawals are tax-free, the deadline creates far less pain than it does with a traditional account.
Planning around the window
For families, the compressed timeline turns inherited IRAs into something to plan for rather than stumble into. Original owners who want to ease the burden on heirs sometimes convert traditional balances to Roth accounts during their own lower-income years, paying the tax at their rate so beneficiaries inherit tax-free money instead of a tax bill. Naming beneficiaries thoughtfully matters too, since leaving a large IRA to a high-earning heir concentrates the tax hit, while other assets that receive a step-up in basis can pass with little or no income tax. And for the heirs themselves, the safest habit is to map out withdrawals across the full decade early, rather than let the balance sit and force a punishing final-year distribution. The ten-year rule cannot be avoided by most beneficiaries, but its damage can be blunted by anyone who plans for it in advance.
Beneficiaries also have room to coordinate withdrawals with the rest of their financial lives. Taking more in a year when other income happens to be low — a gap between jobs, an early-retirement year, a year with large deductions — can keep the added money in lower brackets, while easing off in high-income years avoids stacking the inherited balance on top of a peak salary. Keeping careful track of the ten-year deadline, and of any required annual amounts along the way, prevents the penalties that catch heirs who lose the thread. The rule is unforgiving of inattention, but it rewards a plan.
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This article was researched and drafted with AI assistance and reviewed against the linked primary sources.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
