Inheriting an IRA comes with a decision most people never expect to face: how fast the money has to come out. Get the timing wrong, and the tax bill can be much bigger than it needs to be.
If you recently inherited a traditional IRA, the inherited IRA RMD rules determine how soon you must withdraw the money and how much tax you will owe. Congress rewrote these rules in 2019, and the IRS finalized the details in 2024. Most beneficiaries now face a strict 10-year deadline, and some must also take withdrawals every single year along the way.
What is an inherited IRA RMD?
An RMD, or required minimum distribution, is the smallest amount the IRS lets you leave in a retirement account each year before it forces you to withdraw more. For your own IRA, this rule keeps the account from growing tax-deferred forever.
An inherited IRA works differently. When you inherit an IRA from someone other than a spouse, the rules are no longer based on your life expectancy alone. Instead, a set of deadlines apply based on when the original owner died and whether they had already started taking their own RMDs.
Any taxable money you take out of an inherited traditional IRA generally counts as ordinary income on your tax return. That is what makes timing so important. Take too much out in one year, and you can push yourself into a higher tax bracket.
What are the inherited IRA RMD rules right now?
For most people who inherited a traditional IRA from someone who died after 2019, the account must be fully emptied by December 31 of the 10th year after the owner’s death. This is called the 10-year rule.
Whether you also have to take money out every year in between depends on one question: had the original owner already reached their required beginning date when they died? That date is generally April 1 of the year after the IRA owner reaches their applicable RMD age, currently 73 for many retirees and 75 for those born in 1960 or later.
If the owner died before reaching that date, you have flexibility. No annual withdrawals are required. You can leave the account alone for years and take everything out in year 10, spread it evenly, or withdraw whatever amounts make sense for your tax situation, as long as the account reaches zero by the deadline.
If the owner died on or after that date, the rules are stricter. You must take an RMD every year from year 1 through year 9, based on your own life expectancy, and the account must still be empty by the end of year 10. The IRS finalized this requirement in July 2024, and it has applied starting with the 2025 tax year.
This distinction catches a lot of beneficiaries off guard. Many people assume the only deadline that matters is the 10-year mark. If you inherited from someone who was already taking RMDs, skipping withdrawals in years 1 through 9 can trigger a penalty, even though the 10-year window has not closed yet.
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Who can skip the inherited IRA 10-year rule?
Not everyone is subject to the 10-year rule. The IRS created a category called an eligible designated beneficiary, and these beneficiaries can still stretch withdrawals over their own life expectancy, the way most beneficiaries could before 2020.
You qualify as an eligible designated beneficiary if you are one of the following:
- The surviving spouse of the IRA owner
- A minor child of the IRA owner (this exception lasts until the child turns 21, at which point the 10-year clock begins)
- Someone who is disabled, as defined by the IRS
- Someone who is chronically ill, as defined by the IRS
- Someone who is not more than 10 years younger than the IRA owner
Surviving spouses have the most flexibility of all. A spouse can choose to treat the inherited IRA as their own, which means no 10-year rule applies and their own RMDs do not start until they reach their own applicable RMD age. A spouse can also choose to remain a beneficiary instead, which can make sense if they are under 59 and a half and may need penalty-free access to the money.
If you do not fall into one of these categories, which describes most adult children, grandchildren, and other heirs, the 10-year rule applies to you.
What happens if you miss an inherited IRA RMD?
Missing a required withdrawal, whether it is one of the annual amounts in years 1 through 9 or the final balance in year 10, triggers an IRS penalty. The penalty is 25 percent of the amount you should have withdrawn.
That penalty drops to 10 percent if you correct the mistake within the IRS’s correction window, generally within two years of when the missed RMD was due. The IRS can also waive the penalty entirely for a reasonable, one-time error, but you have to request that relief. It is not automatic.
Between 2021 and 2024, the IRS waived penalties for missed annual RMDs on inherited IRAs while it worked out the final rules. That waiver period has ended. Starting with 2025, beneficiaries of an owner who died on or after their required beginning date are expected to take their annual RMDs on schedule.
How to time your inherited IRA withdrawals to pay less tax
If you fall into the group that has flexibility (you inherited from someone who died before their required beginning date, or your inheritance is a Roth IRA), the real decision is not whether to take the money out. It is when.
Here is a hypothetical example to illustrate the idea. Say Carol inherited a $400,000 traditional IRA from her father in 2024. He died at 68, before his required beginning date, so Carol has no annual RMD requirement, only the 10-year deadline at the end of 2034.
Carol is 45 and still working, earning $150,000 a year. If she waited until year 10 and withdrew the full $400,000 in a single year, that amount would land on top of her salary all at once, pushing a large share of it into a much higher tax bracket than she pays today.
Carol plans to retire in about six years. Instead of waiting until the deadline, she is planning to withdraw larger amounts in years 6 through 10, after her salary stops and her taxable income drops. By matching her withdrawals to the years when her other income is lower, she can pull more money out of the IRA while staying in a lower tax bracket than a single lump sum would put her in.
This is a simplified, hypothetical example. Your own numbers will depend on your income, filing status, and how tax brackets shift from year to year. The general principle holds regardless of your specific numbers: withdrawing a fixed amount every year, or timing larger withdrawals for lower-income years, usually costs less in taxes than either ignoring the account for nine years or draining it all at once. A retirement planning tool that lets you model different withdrawal schedules against your expected income can make this kind of comparison much easier than doing the math by hand.
How inherited IRA withdrawals can affect your Medicare premium
There is a second cost to consider if you are on Medicare or approaching it. Medicare bases your Part B and Part D premiums partly on your income from two years earlier. This is known as IRMAA, an extra amount added to your premium once your income crosses certain thresholds.
For 2026, the standard Part B premium is $202.90 a month, and the first IRMAA threshold starts at $109,000 for single filers and $218,000 for married couples filing jointly. A large inherited IRA withdrawal can push your income over that threshold, even if it happens in a single year. Because Medicare looks back two years, the higher premium does not show up right away. It shows up two years later, which can catch people off guard if they have already forgotten about the withdrawal that caused it.
If you are within a couple of years of enrolling in Medicare, or you are already enrolled, it is worth checking how a planned withdrawal from an inherited IRA might affect your income for IRMAA purposes before you take it. A Medicare advisor who understands how income and premiums interact can help you see the full picture, not just the tax return.
What to do if you just inherited an IRA
If you recently inherited an IRA, a few early steps can save you from costly mistakes later:
- Find out the exact date the original owner died and whether they had started taking RMDs.
- Confirm which category of beneficiary you fall into: eligible designated beneficiary or subject to the 10-year rule.
- Ask the custodian to retitle the account correctly as an inherited IRA. Do not roll it into your own IRA unless you are a surviving spouse making that specific election.
- If there is a year-of-death RMD the original owner had not yet taken, make sure it gets withdrawn by December 31 of that year.
- Build a withdrawal plan for the full 10-year window rather than deciding year by year. A plan that looks at your income across the whole decade will usually beat a series of one-off decisions.
The bottom line
The inherited IRA RMD rules changed significantly in the last few years, and the details depend heavily on your specific situation. The single most important thing to determine first is whether the original owner had reached their required beginning date. That answer decides whether you have annual withdrawal requirements or the flexibility to plan your own schedule.
This article is for general education and is not personalized tax, legal, or financial advice. Inherited IRA rules involve details specific to your situation, including the type of account, the beneficiary category you fall into, and state tax rules. Before making withdrawal decisions, confirm the details with the account custodian and consult a qualified tax professional or financial advisor.
Note Boldin is an affiliate relationship of Holy Schmidt!. This means if you purchase a product or use their service, we earn a small commission. This does not increase your cost.
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