An Inherited IRA Comes With a Ten-Year Clock, and a Ten-Year Choice. She Emptied Hers Across the Two Years She Wasn’t Working.
Most people who inherit an IRA assume the ten-year rule forces a steady, predictable drawdown. It does not, and the gap between those two assumptions can mean the difference between paying peak tax rates and paying almost nothing.
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If you inherit an IRA from a parent, sibling, or friend who passed away after December 31, 2019, there is a rule that most beneficiaries tend to misread. That account has to be completely emptied by the end of the tenth year following the death. But here is where the flexibility actually sits. Nothing in the statute forces the money out evenly, nor does it impose any particular schedule in most cases.
A non-spouse beneficiary can take nothing for nine years and then drain the entire account in year ten, empty it all during a single low-income year, or spread distributions out to fill the bottom tax brackets each year. The ten-year clock functions more like a ten-year choice, and a beneficiary who happens to spend two of those years between jobs can empty the account at a marginal rate that a working year simply would not have allowed.
What the Statute Actually Says
The provision comes from the SECURE Act of 2019, codified at Internal Revenue Code §401(a)(9)(H). It replaced the old “stretch IRA” for most non-spouse heirs. The IRS issued final regulations in July 2024 that took effect for the 2025 distribution year, clarifying two points that had been in limbo: the ten-year deadline is the end of the calendar year containing the tenth anniversary of the original owner’s death, and annual required minimum distributions inside that window apply only when the original owner had already begun taking their own RMDs.
Who Falls Under the Ten-Year Clock
The 10-year rule only applies to what the IRS calls “non-eligible designated beneficiaries.” That bucket includes most adult children, grandchildren, siblings, nieces, nephews, and even friends who inherit an IRA. Five specific groups get an exception and can still stretch distributions over their own life expectancy. Surviving spouses qualify. Minor children of the original owner qualify, but only until they turn 21. Disabled beneficiaries and chronically ill beneficiaries also get the exception, along with anyone who is not more than ten years younger than the person who passed away. If a trust or estate is named directly as the beneficiary, that typically gets pushed onto a five-year schedule instead.
How the Low-Income Year Play Works
Withdrawals from an inherited traditional IRA count as ordinary income. Concentrating them in years of unusually low earnings, a career break, graduate school, parental leave, caregiving, or early retirement compresses the total tax bill. The mechanics are straightforward:
- The death date and whether the original owner had reached their required beginning date (generally April 1 of the year after turning 73 under SECURE 2.0) determine whether annual RMDs are mandatory in years one through nine.
- Taxable income can be projected year by year across the ten-year window, flagging the lowest-income years, whether from a planned sabbatical, a return to school, or a gap between roles.
- Distributions in each low-income year can be sized to fill the current bracket without spilling into the next. Federal withholding can be taken at distribution or through quarterly estimated payments.
- The balance must reach zero by December 31 of the tenth year after death. Distributions to non-spouse beneficiaries are exempt from the 10% early-withdrawal penalty regardless of age, under IRC §72(t)(2)(A)(ii).
Assets left inside the account during the window can stay invested. With the 10-Year Treasury yielding 4.74% as of August 21, 2026, even conservative allocations can generate meaningful returns before the deadline forces liquidation.
Trap That Can Cost 25% on Top of Income Tax
If the original owner died on or after their required beginning date, the beneficiary must take an annual RMD in years one through nine and empty the account in year ten. Skipping a required distribution triggers a 25% excise tax on the shortfall under SECURE 2.0, dropping to 10% if the missed amount is withdrawn and Form 5329 is filed within the correction window (one of nine IRS rules that quietly drain inherited accounts, all mapped out in a free report here).
The IRS waived enforcement of these annual RMDs for 2021 through 2024 while the regulations were pending, but that grace period ended. 2025 was the first mandatory year, and you must take 2026 distributions by December 31. The ten-year deadline itself is absolute: any dollar left in the account on January 1 of year eleven is subject to the same excise tax on the full remaining balance.
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David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
