Inherited Roth IRA 10-Year Rule

The 10-year rule requires non-spouse beneficiaries of Roth IRAs inherited after December 31, 2019 to empty the account by December 31 of the 10th year after the owner's death. Per Treasury Decision 10001 (July 2024), inherited Roth IRAs have no annual RMDs in years 1–9 — only the year-10 depletion deadline. Missing it triggers a 25% excise tax on what's left.

This is one of the most important — and most misunderstood — rules for inherited Roth IRAs. The "no annual RMDs in years 1–9" carve-out exists because a Roth owner is always treated as having died before their required beginning date, so the standard stretch mechanics that apply to inherited Traditional IRAs don't apply here. That single fact is worth tens of thousands of dollars of tax-free compounding — and most articles on the internet still get it wrong.

The SECURE Act Changed Inherited IRA Rules

Before January 1, 2020, non-spouse beneficiaries of IRAs could use the "stretch IRA" strategy: they'd calculate required minimum distributions based on their life expectancy and stretch withdrawals over 30+ years. This was extremely powerful for wealth transfer because the account could compound tax-free for decades.

The Secure Act ended this. Starting with deaths on or after January 1, 2020, most non-spouse beneficiaries must now withdraw the entire inherited IRA balance within 10 years. This is a seismic shift in retirement planning for anyone with a large IRA or Roth to pass down.

Key point: The rule is "empty by year 10," not "withdraw evenly over 10 years." You have complete flexibility on the withdrawal schedule—you could take nothing in years 1-9 and withdraw the entire balance in year 10. The account continues to grow tax-free throughout the 10 years.

Did You Inherit Before 2020? The Grandfathered Stretch Still Applies

If the original Roth owner died on or before December 31, 2019, you are grandfathered under the old stretch-IRA rules. The SECURE Act does not apply retroactively — its 10-year rule is keyed to the owner's date of death, not yours. You may take annual RMDs over your Single Life Expectancy factor for the rest of your life, and the account continues to compound tax-free for decades.

How the mechanics work for grandfathered inheritors:

1. Year 1: Look up your age (the age you attained in the year following the owner's death) on the IRS Single Life Table. That factor is your divisor. RMD = December 31 prior-year balance ÷ factor.
2. Years 2+: Under the subtract-one method, the prior year's factor minus 1.0 becomes the current year's factor. Your RMD amount grows slowly over time as the divisor shrinks.
3. 2022 transition reset: The IRS updated the Single Life Table effective 2022 (longer life expectancies baked in). If you started your stretch under the 2002 table, you had to reset your initial factor using the new 2022 table as if you had started under it — a one-time recalculation that made your RMDs smaller. Your custodian should have applied this automatically; confirm they did.

What happens when the grandfathered beneficiary dies. The successor beneficiary (the person you name on your inherited Roth) does not inherit another life-expectancy stretch. They get the 10-year rule from your death forward, because your death falls after January 1, 2020. Put differently: the grandfather protection ends with you. For planning purposes, this means a pre-2020 stretch can keep compounding for decades, but whoever you leave it to after that gets a 10-year window.

A quiet tax-free compounding machine. If you inherited a Roth under the pre-2020 rules in your 40s or 50s, the math is extraordinary. A $200,000 Roth stretched over a 40-year life expectancy, growing at 7% annually, would pay out well over $1 million in tax-free distributions while leaving a terminal balance. There's essentially no reason to take more than the minimum — every discretionary dollar withdrawn sacrifices decades of tax-free growth.

When Does the 10-Year Clock Start?

The clock starts in the year following the year of death, not the year of death itself.

Example: If the Roth owner died in 2024, the 10-year clock runs through the year containing the 10th anniversary of death. The beneficiary has until December 31, 2034 to empty the account.

If the Roth owner died on December 31, 2024, that counts as 2024 (death in 2024), so the 10-year period runs through December 31, 2034.

Who Is Subject to the 10-Year Rule?

Most non-spouse beneficiaries land in the 10-year rule. The statute carves out five exceptions, the Eligible Designated Beneficiaries (EDBs) under IRC §401(a)(9)(E)(ii):

• Surviving spouse: Not stuck with the 10-year rule. A spouse can treat the account as their own (best result for Roths) or remain a beneficiary.
• Disabled or chronically ill beneficiary: Must meet the IRC §72(m)(7) disability standard or §7702B(c)(2) chronic illness standard. Can use the life expectancy method.
• Minor child of the original owner: Uses life expectancy until age 21 (the uniform age set by the July 2024 final regulations), then the 10-year clock starts.
• Beneficiary not more than 10 years younger than the owner: A sibling, partner, or close-in-age friend can still stretch.
• Entity beneficiary (estate, non-see-through trust, charity): Stuck with the old 5-year rule—stricter than the 10-year rule.

If you're unsure of your status, contact the IRA custodian immediately with the original beneficiary designation form. Misclassification can lead to missed deadlines and penalties.

The Annual-RMD Question, Finally Settled

This is where most online guidance is still wrong. You'll see "you must take annual RMDs within the 10 years if the owner had reached their required beginning date." For traditional IRAs that's accurate. For inherited Roth IRAs it is not.

Here's the clean logic from the final Treasury regulations (TD 10001, published July 19, 2024, effective January 1, 2025):

• Whether annual RMDs apply inside the 10-year window depends on whether the owner died before or on/after their required beginning date (RBD).
• A Roth IRA owner has no RBD during life—Roth IRAs are exempt from the owner's lifetime RMD rules (IRC §408A(c)(5)).
• Treas. Reg. §1.408A-6, A-14(b) therefore treats every Roth IRA owner as having died before their RBD, no matter their age.
• Result: no annual RMDs in years 1 through 9. The only required action is having the account at $0 by December 31 of year 10.

This is a real, enforceable rule—not a workaround. You can verify it in the Federal Register release of the final regulations (89 FR 58886) and in the preamble discussion of §1.401(a)(9)-3.

For the mechanics and penalty math if you ever need them, see the Inherited Roth IRA RMDs article.

Strategic Withdrawal Planning: Three Approaches

Approach 1: Delay and Lump Sum (Maximum Tax-Free Growth)

Take no distributions in years 1-9. In year 10, withdraw the entire balance in a lump sum. This maximizes tax-free compounding.

Example: Inherited $200,000 Roth in 2024. Let it grow 8% annually for 9 years = $399,000. In 2034, withdraw $399,000. Tax-free withdrawal of an extra $199,000 in growth.

This works only if: (1) you don't need the money for 10 years, and (2) the account growth assumption holds. Market downturns could reduce the final balance.

Approach 2: Even Distributions (Steady Income Stream)

Divide the opening balance by 10 and withdraw that amount each year (adjusted for growth). This provides steady income and avoids a single large withdrawal in year 10.

Example: Inherited $200,000 Roth in 2024. Withdraw $20,000 per year for 10 years (2025-2034). The remaining balance continues growing, so year 10 may have more than $20,000 available to reach the $0 target.

This approach is tax-efficient if you have other income sources and want to avoid pushing yourself into a higher tax bracket in year 10. For Roths (tax-free), the bracketing concern is minimal, but the steady cash flow may align better with cash flow needs.

Approach 3: Strategic Partial Distributions (Tax Planning)

Take distributions based on tax-planning considerations: lower-income years, charitable giving strategies (donor-advised funds), or Roth conversion planning if you have a traditional IRA.

Example: Years 1-5, withdraw $15,000/year (to stay below tax brackets or work with other income sources). Years 6-10, increase to $35,000/year (family situation changes, income rises). The key is flexibility.

The 25% Excise Tax: What Happens If You Miss the Deadline?

Under IRC §4974 (as amended by SECURE 2.0), missing the deadline triggers a 25% excise tax on the balance still sitting in the account. The tax is separate from income tax and is owed directly to the IRS.

Example: You inherited $100,000. By December 31 of year 10, you've only withdrawn $70,000, leaving $30,000 in the account. The $30,000 is subject to the 25% excise tax — $7,500 owed on Form 5329.

The 10% correction window. If you catch the mistake and distribute the remaining balance within the "correction period" (generally by the end of the second year following the missed-RMD year), the excise tax drops from 25% to 10%. You can also request a full waiver on Form 5329 with a reasonable-cause statement—the IRS has historically been lenient for first-time errors, but don't count on it.

How to request the waiver on Form 5329. Take the missed distribution first, then complete Part IX of Form 5329. On line 54 enter what you should have distributed; on line 55 enter what you actually took. In the margin next to line 55, write “RC” (reasonable cause) and the dollar amount you want waived. Attach a short statement explaining why the distribution was missed and the corrective steps you've taken. File with your Form 1040 — pay no excise tax with the filing while the waiver is pending. Silence from the IRS usually means granted; if the waiver is rejected you'll receive a CP15 notice.

Withholding trap when you do take distributions. Because custodians were built around taxable traditional IRAs, most apply a default 10% federal withholding on any IRA distribution unless you tell them otherwise. For a qualified inherited Roth distribution, nothing is taxable — any amount withheld simply becomes a refund when you file. Submit Form W-4R electing 0% federal withholding before each distribution so the custodian sends you the full amount.

The bottom line: plan to be at $0 well before the deadline.

Market Risk and Planning for Unknown Growth

The 10-year timeline overlaps multiple market cycles. If you inherited a $200,000 Roth in 2024 and planned to let it grow for 10 years at 7% annually, a 2026 market crash could reduce the balance to $150,000 by 2035. You'd still need to withdraw $0 by the deadline, but the purchasing power is lower.

Similarly, if the account grows to $400,000 due to strong market returns, your tax-free windfall is even larger.

Planning insight: Model three scenarios: conservative (4% growth), moderate (6% growth), and optimistic (8% growth). This helps you estimate how much wealth you're inheriting and whether your withdrawal strategy is prudent.

If you're using the "delay until year 10" strategy, monitor the account quarterly. If it's underperforming, you may want to increase earlier withdrawals to derisk. Conversely, if it's outperforming, you might delay more distributions to maximize compounding.

Multiple Beneficiaries on the Same Account: Use the Separate-Account Rule

If the original Roth IRA named more than one beneficiary — for example, three adult children sharing one account — the default treatment groups all of them as a single designated beneficiary. That can erase planning flexibility: if any beneficiary in the group would have qualified as an EDB, the group as a whole can't use EDB life-expectancy treatment unless the account is split.

The fix is documented in Treas. Reg. §1.401(a)(9)-8, Q&A-2 and the 2024 final regulations: divide the single inherited Roth into separate inherited Roth IRAs for each beneficiary by December 31 of the year following the owner's death. For a 2025 death, the deadline is December 31, 2026. Once divided, each beneficiary's inherited Roth is evaluated under its own rules — and an EDB sibling can take life-expectancy distributions while the non-EDB siblings run their own independent 10-year windows.

For a group where everyone is a non-EDB on the 10-year rule, the separate-account split still matters for administration. Each beneficiary picks their own investments, chooses their own withdrawal timing, and names their own successor beneficiary. Nobody has to coordinate with the others to access their share. It's worth asking the custodian for the split even when the distribution deadline would be identical.

Inherited Roth vs. Inherited Traditional: Why the Annual-RMD Difference Matters

For traditional inherited IRAs, it actually does matter whether the owner died before or after their RBD. If they died on or after their RBD, the beneficiary must take annual RMDs during years 1–9 based on their single life expectancy and empty the account by year 10. That's the "at-least-as-rapidly" rule.

For inherited Roths, that split disappears. Because the Roth owner is always treated as dying before their RBD, the beneficiary gets the cleaner path: no annual minimums, just the year-10 zero-balance deadline. The difference is substantial for big accounts—tens to hundreds of thousands of dollars of additional tax-free compounding depending on balance and growth rate.

For the detailed RMD calculation mechanics (and the traditional IRA rules), see the Inherited Roth IRA RMDs article.