Tim Dick, CFP®
Posted on Aug 27, 2026
If you’ve inherited an IRA or 401(k) in the past few years, you’re far from alone. As the baby boomer generation moves into their 70s, 80s, and beyond, more families than ever are receiving retirement accounts from parents and other loved ones, a trend that’s only expected to grow over the next decade. Unlike other assets, inherited IRAs come with puzzling rules that catch a lot of people off guard. Let’s discuss the 10-year rule and what it means for you.
Required Minimum Distributions (RMDs)
A RMD is the specified amount the IRS requires owners to distribute from a retirement account in a given year. For most IRA owners, RMDs don’t come into play until their mid-70s. However, inherited IRAs are treated differently, mandating that many beneficiaries begin withdrawals as soon as the year after inheritance. Moreover, recent legislation, capped off by final IRS rules in 2024, drastically reshaped how these withdrawals work for most people.
What is the 10-Year Rule?
In simple terms, most non-spouse beneficiaries who inherit an IRA must fully withdraw the account by the end of the 10th year after the year of the original owner’s death.
Within that 10-year window, some beneficiaries owe an RMD every single year, while others have full flexibility until the 10th year after death. Which category applies to you depends on whether the original owner had started taking their RMDs before death. It’s the kind of thing worth confirming with an advisor or tax professional rather than guessing, since getting it wrong can mean a missed withdrawal and a penalty.
It’s also worth noting that the 10-year rule doesn’t apply to everyone. A smaller group of beneficiaries known as “Eligible Designated Beneficiaries” (EDBs), which includes a surviving spouse and minor children among others, can instead stretch withdrawals over a longer period. If you don’t fall into one of those exceptions, the 10-year rule almost certainly applies to you.
Ignoring It Can Cost You
A 10-year deadline can feel far off, which is exactly why it’s easy to lose track. Meanwhile, if the account stays invested, it keeps compounding. By the time year ten arrives, the balance has often grown well beyond what was originally inherited and the full amount has to come out at once. That forces a single, much larger taxable distribution than if withdrawals had been spread out along the way. Oftentimes, that single, large taxable distribution can set off a cascade of knock-on effects:
- A spike into a much higher tax bracket in the year you finally withdraw, taxing a chunk of that money at a rate far higher than necessary.
- Reduction to Financial Aid eligibility if you or child is applying for income-based aid.
- More of your Social Security benefit becoming taxable, since a sudden jump in income can push more of it into taxable territory.
- Higher Medicare premiums, through IRMAA surcharges that are based on income from a prior year and can catch people by surprise.
- Loss of eligibility for other income-based benefits or credits that phase out as income rises.
- Potential IRS penalties up to 25% of the required withdrawal amount.
None of this is inevitable. It’s simply what happens by default when the account is left alone and the deadline is left to sneak up.
Create A Withdrawal Plan
The good news is that you generally can control when and how much to distribute from an Inherited IRA during the 10-year window, so there’s real room to plan. But there’s no single “right” distribution schedule that works for everyone. The best approach depends on your income, your career stage, your other assets, your family situation, and how all of that is likely to shift over the next decade. That’s exactly why this isn’t a one-size-fits-all calculation.
This is where working with an advisor who specializes in tax and distribution planning makes a real difference. Someone who understands how inherited IRA withdrawals interact with your other income, your retirement accounts, and your long-term goals can help you weave those withdrawals into a broader financial plan, rather than treating the 10-year rule as an isolated deadline to deal with on its own. What makes sense for one family rarely looks the same for the next, and getting that fit right is where the tax savings actually come from.
The 10-year rule isn’t something to figure out in year nine. The choices you make early, or don’t make at all, determine how much of an inherited account you actually keep after taxes. If you’ve inherited a retirement account and haven’t yet mapped out a withdrawal strategy, now is the time.
Our team at Merrimack Wealth specializes in tax and distribution planning and can help you build a strategy tailored to your own financial picture. Reach out to get started.
This content is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.