There’s an Exception to the “No RMDs” Rule for Roth IRAs. Get It Wrong, and You Could Face a 25% Tax Bill.

If you own a Roth IRA, you already know the headline perk: no required minimum distributions during your lifetime. The account grows tax-free for as long as you live, and no IRS schedule forces withdrawals. The risk arrives at death. Your heirs inherit a withdrawal clock, and missing a deadline can trigger a 25% excise tax on the amount they should have taken out.

Inherited Roth IRAs run on a 10-year clock

While you are alive, your Roth IRA stays free of RMDs. After your death, most beneficiaries fall under the 10-year rule, which requires the inherited Roth to be emptied within 10 years of the original owner’s death. Qualified withdrawals stay tax-free after the transfer, but the account can no longer remain open indefinitely.

Before the SECURE Act took effect in 2020, non-spouse heirs could stretch inherited IRA distributions across their own life expectancies, a approach known as the “stretch IRA.” A 40-year-old heir could take modest withdrawals for decades while the balance kept compounding. Congress closed that path for most heirs and replaced it with the fixed 10-year deadline.

The legal foundation

Congress wrote the 10-year rule into the SECURE Act of 2019, and it covers most non-spouse beneficiaries who inherit from an owner who died in 2020 or later. Treasury and the IRS later issued final regulations (T.D. 10001) on July 19, 2024, and those rules took effect for distributions beginning in 2025. The authority rests on Internal Revenue Code §401(a)(9), which governs distributions from inherited retirement accounts.

SECURE 2.0 also changed the penalty math. It reduced that tax from 50% to 25% of the amount not paid to you on time, and further reduces the excise tax to 10% of that amount if you meet the conditions of section 4974(e) of the Internal Revenue Code, and the RMD is timely corrected within two years.

Between 2021 and 2024, the IRS issued penalty-relief notices (2022-53, 2023-54, and 2024-35) that waived excise taxes on missed inherited IRA distributions while the rules were still unsettled. The four years of penalty relief from 2021 through 2024 did not push anyone’s final deadline back. Enforcement begins in 2025, so a missed distribution now carries the full 25% excise tax unless a correction or waiver applies.

Who the rule covers, and who gets more time

The 10-year rule targets non-eligible designated beneficiaries: adult children, grandchildren, siblings, friends, and most other non-spouse heirs. Eligible designated beneficiaries get a longer runway. That group includes a surviving spouse, who can roll the Roth into their own IRA, a minor child of the deceased, a disabled or chronically ill beneficiary, and anyone no more than 10 years younger than the owner. Beneficiaries older than the deceased owner also sit outside the 10-year rule. Everyone else’s clock starts the year after the owner dies.

The 2024 final regulations set age 21 as the cutoff for minor children, which replaces a patchwork that deferred to state law. In most states, the legal age of majority is 18, so the federal line sits three years later than many families would expect. A single national rule removes the guesswork about when the minor’s clock starts.

Using the 10-year window

Inside the 10-year window, an inherited Roth gives heirs real room to choose. Because the original owner never had a Required Beginning Date, the account is treated as a pre-RBD death for inherited-IRA purposes, and no annual RMD applies in years 1 through 9. An heir can withdraw a little each year, wait nine years and empty the account in year 10, or blend the two approaches. The framework below helps structure that decision.

1. Confirm whether the Roth met its five-year holding period. If it did, withdrawals of earnings come out tax-free. If it did not, earnings may stay taxable until that period ends.
2. Map your tax bracket for the next decade. A high-earning heir usually benefits from spreading tax-free Roth withdrawals across several years rather than taking one large distribution late in the window.
3. Watch for the kiddie tax if the beneficiary is a full-time student. When it applies, most of the child’s unearned income may be taxed at the parent’s higher tax rate. That changes the timing math for any taxable withdrawal.
4. Avoid the year-10 lump sum trap. Roth distributions are generally tax-free, but a single large withdrawal can still affect Medicare IRMAA surcharges, financial-aid calculations, and any taxable portion of the account. The Medicare surcharge in 2026 applies to beneficiaries with income exceeding $109,000 (for single filers and married filing separately), and the 2024 income tax return is used to determine whether you’re subject to IRMAA. At the first tier, the total monthly Part B premium rises from the standard Part B premium for 2026 is $202.90 per month to $284.10. Keeping income at or below $109,000 keeps the standard rate in place.
5. Mark December 31 of year 10 on the calendar. That is the hard deadline, and the account must show a zero balance by then. For an owner who died in 2022, An account inherited from someone who died in 2022 must be fully distributed by December 31, 2032.

Planning can also happen earlier, on the owner’s side. Converting a traditional IRA to a Roth before death can leave heirs with a tax-free inherited account instead of a fully taxable one. A non-spousal heir cannot do that conversion after the owner dies, so the decision has to be made while the owner is still alive.

How the 25% penalty works for Roths

For an inherited Roth, penalty risk comes down to one date: December 31 of year 10. Roth owners have no Required Beginning Date under IRC §408A(c)(5), so beneficiaries face no required annual distributions in years 1 through 9. The 10-year deadline still applies in full, and any balance left after it is exposed to the 25% excise tax. The 10% correction rate applies only when the saver takes the missed distribution and files the proper correction within two years. The IRS can also waive the penalty for reasonable cause. Request a waiver for reasonable cause and it can go to zero. A waiver is discretionary, so heirs should not count on one.

Traditional inherited IRAs are more complicated. When the original owner had already died after their Required Beginning Date, the beneficiary must also take annual RMDs during years 1 through 9 of the 10-year window and fully empty the account by the end of year 10. That structure creates several possible penalty points across a decade. A pure inherited Roth carries a narrower risk: one deadline, and one avoidable error of letting the balance sit past it without realizing the rule applies.

This is general education, not personalized financial advice.

Editor’s note: The update clarifies that the IRMAA threshold is measured on 2024 income and that the first surcharge tier runs to $137,000 for single filers. It also sets the kiddie tax at full-time students under age 24 and confirms that IRS penalty waivers covered 2021 through 2024 before full enforcement began in 2025.

Contact [email protected] for any questions or corrections.