The grace period is over. Starting in 2025—and with full enforcement in 2026—the IRS is strictly applying the 10-year rule for inherited traditional IRAs. Many beneficiaries who inherited accounts after 2019 now face mandatory annual withdrawals and a hard deadline to empty the account. Missing required minimum distributions (RMDs) can trigger significant penalties, making proactive planning essential.

Understanding the 10-Year Rule

Passed as part of the SECURE Act in 2019, this rule eliminated the “stretch IRA” strategy for most non-spouse beneficiaries. Instead of spreading withdrawals over a lifetime, non-eligible designated beneficiaries (NEDBs)—typically adult children and other heirs—must fully distribute the inherited IRA by December 31 of the 10th year following the original owner’s death.

Exemptions apply to eligible designated beneficiaries, including:

  • Surviving spouses
  • Minor children (until they reach adulthood)
  • Chronically ill or disabled individuals
  • Beneficiaries no more than 10 years younger than the original owner

For most adult children inheriting a parent’s IRA, the 10-year clock is ticking.

Annual RMD Requirements Depend on the Original Owner’s StatusThe timing of distributions hinges on whether the deceased had reached their required beginning date (RBD)—generally April 1 following the year they turned 73—and had begun taking RMDs.

  • If the owner died before their RBD (not yet taking RMDs): No annual distributions are required during the 10 years. You have flexibility, but the account must be fully emptied by the end of year 10.
  • If the owner died on or after their RBD (already taking RMDs): You must take annual RMDs each year for the full 10-year period. You cannot wait and withdraw everything in the final year.

The 10-year period begins the year after the owner’s death. For a 2022 inheritance, the deadline is December 31, 2032.

Calculating Your Annual RMD

There is no fixed percentage. Each year’s RMD is calculated as:Prior year-end account balance ÷ Your life expectancy factor (from IRS Single Life Expectancy Table in Publication 590-B)Your factor is based on your age as of December 31 of the distribution year and is recalculated annually. Your IRA custodian can often provide the figure, but verifying with a tax professional—especially in the first year—is strongly recommended.

Missed 2025 RMDs: Act Now to Minimize Penalties

The IRS waived penalties for 2021–2024 while finalizing rules, but that window has closed. A missed 2025 RMD carries a 25% penalty on the undistributed amount, reducible to 10% if corrected promptly.If you missed your 2025 distribution:

  • Withdraw the full missed amount immediately.
  • File IRS Form 5329 with your tax return (or standalone).
  • Include a request for penalty abatement if you have reasonable cause.

Strategic Planning Is Critical

Distributions are taxable as ordinary income, so timing withdrawals to manage tax brackets, coordinate with other income sources, and consider Roth conversions or charitable strategies can preserve more wealth. At Infinium Advisors, we help clients model scenarios, optimize tax outcomes, and ensure compliance while aligning distributions with your broader financial goals. Don’t navigate these complex rules alone. Contact our team today for a personalized review of your inherited IRA situation. Proactive steps now can help you avoid penalties and make the most of your inheritance.

Author

  • Mark is a +27 year, veteran financial advisor and Certified Financial Planner™. He founded Infinium in 2009 to bring a more personal, and truly client-centric offering to investors.