The inherited IRA 10-year rule 2026 is an IRS requirement mandating that non-spouse beneficiaries fully distribute an inherited retirement account within ten years of the original owner's death. Most non-spouse beneficiaries must fully distribute an inherited IRA by December 31 of the tenth year following the original owner's death — or face a 25% excise tax penalty on amounts not withdrawn.1 The 2026 reference pertains to the second year of full enforcement under IRS final regulations issued in 2022, and it affects every client who inherited a retirement account after the original owner's death in 2020 or later. Beginning in 2025, the IRS final regulations require that beneficiaries subject to the 10-year rule who are also subject to annual RMDs must begin taking those required minimum distributions.2 This creates a dual obligation: satisfy annual RMD amounts each year AND fully deplete the account by the end of year ten. At Smart Money After 60, we see this catch a lot of clients who assumed the window was more flexible than it actually is.
What the 10-Year Rule Means for Your Clients Starting 2025
Most non-spouse beneficiaries must fully distribute an inherited IRA by December 31 of the tenth year following the original owner's death — or face a 25% excise tax penalty on amounts not withdrawn.1 The inherited IRA 10-year rule is the compliance framework that defines this deadline; the 2026 reference pertains to full implementation of IRS final regulations issued in 2022, not a new rule taking effect in 2026, and it affects every client who inherited a retirement account after the original owner's death in 2020 or later. Beginning in 2025, the IRS final regulations require that beneficiaries subject to the 10-year rule who are also subject to annual RMDs must begin taking those required minimum distributions.2 This creates a dual obligation: satisfy annual RMD amounts each year AND fully deplete the account by the end of year ten. At Smart Money After 60, we see this catch a lot of clients who assumed the window was more flexible than it actually is.
For a client who inherited a $400,000 IRA from a parent who died in 2020, the 10-year clock started ticking January 1, 2021. The account must be empty by December 31, 2030. If that client is a non-eligible designated beneficiary, they must calculate and withdraw annual RMDs for years 2025 through 2030 based on their single life expectancy.
The 10-Year Rule: What Changed Under the SECURE Act
Before the SECURE Act, non-spouse beneficiaries could "stretch" RMDs over their own life expectancy, keeping tax-deferred growth alive for decades. A 55-year-old inheriting a $500,000 IRA might have stretched distributions over 29 years, taking only $17,000 in year one.
The SECURE Act eliminated this stretch for most beneficiaries, replacing it with the 10-year rule.3 SECURE 2.0, enacted in 2022, made additional changes but did not alter the 10-year rule for inherited IRAs. It raised the RMD age for original account owners to 73 in 2023 and 75 by 2033, but this does not apply to inherited IRA beneficiaries subject to the 10-year rule.4
The key distinction: the original owner's RMD age is irrelevant to the beneficiary's 10-year clock. Even if the original owner died before their own RMDs began, the beneficiary still faces the 10-year depletion requirement.
How the 2026 Effective Date Affects Your Distribution Timeline
The IRS final regulations issued in 2022 took effect for 2025, not 2026; 2026 is simply the second year of full enforcement, which clarified that the 10-year rule requires annual RMDs for certain beneficiaries starting in 2025.2 By 2026, all affected beneficiaries must be in compliance with both the annual RMD requirement and the 10-year depletion deadline.
Consider a client who inherited an IRA from a sibling who died in 2021. The 10-year deadline is December 31, 2031. Under the pre-2022 proposed regulations, some advisors believed the beneficiary could wait until year ten to take the entire distribution. The 2022 final regulations eliminated that interpretation for non-eligible beneficiaries.
For clients who inherited accounts in 2020, 2021, or 2022, the 2025-2026 period is when annual RMDs begin. Missing these first annual RMDs creates a compounding problem: the penalty plus the need to catch up on distributions while still meeting the 10-year deadline.
Non-Eligible vs. Eligible Designated Beneficiaries — Who Is Who
The IRS divides beneficiaries into two categories with very different distribution rules.
| Beneficiary Type | Examples | Distribution Rule |
|---|---|---|
| Eligible Designated Beneficiary (EDB) | Surviving spouse, minor child, disabled individual, chronically ill individual, beneficiary not more than 10 years younger than owner | Stretch RMDs over life expectancy |
| Non-Eligible Designated Beneficiary | Adult child, sibling, friend, trust (non-qualifying), any beneficiary who does not meet EDB criteria | 10-year rule with annual RMDs starting 2025 |
A surviving spouse has the most flexibility. They can treat the inherited IRA as their own through a rollover, delay distributions until the deceased spouse would have turned 73, or take distributions as an EDB over their own life expectancy.1
Minor children qualify as EDBs only until age 21. Once they reach majority, the 10-year rule kicks in, and the remaining balance must be distributed within 10 years.1
The Bennett v. Commissioner ruling addressed creditor protection for inherited IRAs, confirming that inherited IRAs may not receive the same bankruptcy protection as the original owner's IRA.5 This matters for advisors helping clients decide whether to accelerate distributions to protect assets from creditors.
The Annual RMD Gap: No Required Minimum Distributions Until 2026
For beneficiaries who inherited accounts in 2020 through 2024, the IRS waived the penalty for missed annual RMDs during 2021-2024, but the RMD requirement itself existed; the waiver did not eliminate the obligation, only the penalty. The IRS provided transition relief, waiving penalties for missed RMDs during the 2021-2024 period while regulations were being finalized.2
This gap created a dangerous assumption among some beneficiaries and advisors: that no annual RMDs would ever be required. Starting in 2025, that assumption becomes costly.
Suppose a 58-year-old client inherited a $600,000 IRA from their mother in 2021. They took no distributions in 2021, 2022, 2023, or 2024, believing they could wait until 2031. Under the final regulations, they must begin annual RMDs in 2025 based on their life expectancy of approximately 27 years. For example, their 2025 RMD would be roughly $22,200. If they miss it, the penalty would be approximately $5,550 — 25% of the missed RMD amount.
The IRS final regulations took effect in 2025, not 2026. Transition relief ended in 2024. By 2026, enforcement is ongoing but not a new effective date.
Tax Traps: How a Lump-Sum Withdrawal Triggers IRMAA and Higher Brackets
A single large withdrawal from an inherited IRA can push a client into higher tax brackets and trigger Medicare IRMAA surcharges for two years.
| Withdrawal Amount | Marginal Federal Tax Rate (Single Filer) | IRMAA Surcharge (2026 Part B + D) |
|---|---|---|
| $50,000 | 22% | None (if AGI under $106,000) |
| $150,000 | 24% | $1,000-$2,000/year |
| $300,000 | 32% | $3,000-$5,000/year |
| $500,000 | 35% | $5,000+/year |
IRMAA uses a two-year lookback. A 2026 Part B premium is based on the 2024 tax return. So a large withdrawal in 2024 that pushed AGI above $106,000 (single) or $212,000 (married) triggers higher premiums in 2026.6
For a client who took a $200,000 lump-sum distribution in 2024 to "get it over with," the IRMAA surcharge for 2026 could be $2,000-$3,000 per year for both Part B and Part D. That surcharge lasts until the next income adjustment, typically two years.
The 10-year rule does not require lump-sum distribution. Spreading withdrawals across the full decade avoids bracket bunching and IRMAA spikes.
Coordinating Inherited IRA Withdrawals with Social Security and Medicare
Social Security benefits become taxable when provisional income exceeds certain thresholds. For a married couple filing jointly, up to 50% of benefits are taxable when provisional income exceeds $32,000, and up to 85% when it exceeds $44,000.7
An inherited IRA withdrawal counts as ordinary income, increasing provisional income. Suppose a 67-year-old client receives $30,000 in Social Security benefits and takes a $40,000 inherited IRA distribution in the same year. Their provisional income would be half of Social Security benefits plus the $40,000 distribution plus any other income. That $40,000 distribution could push them well into the 85% taxable range.8
Medicare enrollment timing also matters. Clients who delay Part B enrollment while still working and covered by employer insurance must coordinate their Special Enrollment Period. An inherited IRA distribution during the enrollment window could affect income-based premium adjustments.
The Bennett decision clarified that inherited IRAs may not receive the same creditor protections as the original owner's IRA.5 For clients concerned about asset protection, accelerating distributions to move funds into more protected accounts may be worth the tax cost.
Strategies to Minimize Taxes Across the Full 10-Year Window
The optimal distribution strategy depends on the client's current tax bracket, projected future bracket, and other income sources.
Bracket filling. Calculate the client's projected taxable income for each of the 10 years, excluding inherited IRA distributions. Fill the remaining space in each bracket with inherited IRA withdrawals. For example, suppose a single filer has $60,000 in other income. The 22% bracket extends to approximately $100,000, leaving roughly $40,000 of room for inherited IRA distributions at 22%1.
Roth conversion coordination. If the client has their own traditional IRA, consider converting portions to Roth IRA in years when inherited IRA distributions are low. This avoids pushing income into higher brackets.
Charitable strategies. Clients who itemize deductions can use qualified charitable distributions from their own IRA after age 70½, but inherited IRA distributions cannot go directly to charity. Instead, take the inherited IRA distribution, then make a separate charitable contribution to offset the income.
State tax considerations. Nine states have no income tax. Others tax IRA distributions fully. For a client in California, a $100,000 inherited IRA distribution could trigger state tax of $9,300 at the top marginal rate. Spreading the distribution across 10 years at roughly $10,000 per year keeps state tax at approximately 1–2%1.
Your Next Step
Review each client file with an inherited IRA opened after 2019. Calculate the 10-year deadline date and the first annual RMD due date. For clients who inherited accounts in 2020, the first annual RMD is due by December 31, 2025. Schedule a planning session to map out a distribution schedule that fills tax brackets without triggering IRMAA surcharges. Use the IRS life expectancy tables to calculate annual RMD amounts for 2025 through the final year. Document the plan in writing and send a calendar reminder for each year's distribution deadline.
Footnotes
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https://www.irs.gov/retirement-plans/plan-participant-employee/beneficiarys-guide-to-minimum-distributions ↩ ↩2 ↩3 ↩4 ↩5 ↩6 ↩7 ↩8 ↩9
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https://www.federalregister.gov/documents/2022/07/12/2022-14688/retirement-plan-and-ira-required-minimum-distribution-rules ↩ ↩2 ↩3 ↩4
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https://www.congress.gov/bill/117th-congress/house-bill/5376 ↩
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https://www.kiplinger.com/taxes/inherited-ira-bennett-decision-ruling ↩ ↩2 ↩3
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https://www.ssa.gov/benefits/retirement/planner/taxes.html ↩
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https://www.ssa.gov/benefits/retirement/planner/taxes.html ↩