10-Year Rule

The 10-year rule is the post-SECURE Act payout deadline for inherited retirement accounts: the entire account must be distributed by December 31 of the tenth calendar year following the triggering event. It is the term of art used throughout the July 2024 final regulations, alongside its two siblings — the 5-year rule and the life expectancy rule — and its statutory hook is section 401(a)(9)(H), which took the older beneficiary five-year deadline at 401(a)(9)(B)(ii) and stretched it to ten for designated beneficiaries. That beneficiary payout deadline is a different mechanism from the five-year rule that governs Roth holding periods, which shares the name and nothing else.

Four different populations land under it by four different routes, and flattening them into "non-spouse beneficiaries get ten years" is where most explanations go wrong. It applies to: a designated beneficiary who is not an eligible designated beneficiary, which is the default case; an eligible designated beneficiary's own successor beneficiary, once the eligible beneficiary dies; a minor child of the account owner, once that child reaches age 21; and an eligible designated beneficiary who elects into it, where the owner died before their required beginning date and the plan permits the election.

Two requirements, not one. The rule bundles a deadline with a conditional overlay, and they are governed by different tests. The deadline — empty by December 31 of year ten — always applies. The annual withdrawals in years one through nine apply only if the original owner died on or after their required beginning date. If the owner died before it, a beneficiary may take nothing for nine years and withdraw everything in year ten, which is a meaningful planning lever. That test is often paraphrased as "whether the owner had already started taking required minimum distributions," and that paraphrase is wrong: the required beginning date is a specific date, and an owner can reach it without having yet taken a distribution, or take a voluntary withdrawal years before it. Because Roth IRA owners never have a required beginning date, they are always treated as dying before it — so the annual-withdrawal overlay never reaches an inherited Roth IRA at all.

There is one exception to that exception. A minor child of the account owner who has been taking life-expectancy distributions as an eligible designated beneficiary keeps taking annual distributions through the ten-year window after turning 21, regardless of the owner's required beginning date. The child is not switching to a clean ten-year deferral; they are keeping the annual schedule and gaining a deadline.

Who is outside the rule. Eligible designated beneficiaries — the surviving spouse, a minor child of the owner, someone disabled or chronically ill, and a beneficiary not more than ten years younger than the owner — use the life expectancy rule instead. Beneficiaries who are not individuals at all, such as an estate, a charity, or a trust that does not qualify as a see-through, are non-designated beneficiaries and never get ten years: they fall under the 5-year rule if the owner died before the required beginning date, or must spread distributions over the decedent's own remaining life expectancy — informally the "ghost" life expectancy — if the owner died on or after it. That second branch can actually be longer than ten years for an owner who died relatively young, which makes it one of the few situations where a non-designated beneficiary produces a slower payout than a designated one. That is a statement about the payout period only, and not a reason to name an estate: doing so also routes the account through probate, forecloses splitting it into separate inherited accounts for individual heirs, and can expose the income to compressed estate or trust tax rates.

What the clock does and does not measure. The ten years are calendar years, not a rolling anniversary period, and they run from the triggering event. A death in a given year means the account must be empty by December 31 ten years later. For a minor child, the trigger is the 21st birthday, so a child who inherits at age five keeps taking life-expectancy distributions until 21 and then has until the end of the year they turn 31. The rule reaches employer plan balances too — an inherited 401(k) or 403(b) is subject to it just as an inherited IRA is.

How live is it? The final regulations apply for calendar years beginning on or after January 1, 2025. Because the annual-withdrawal question was unsettled for several years, the IRS waived the excise tax for missed annual withdrawals for 2021 through 2024. The practical result is that 2025 was the first year in which a ten-year beneficiary's annual withdrawal was genuinely enforced, so a beneficiary who inherited early in the SECURE era may have a compliance history that looks inconsistent for entirely legitimate reasons.

The sequence: identify the beneficiary's category, because that decides which of the three payout rules applies; if it is the 10-year rule, identify the triggering event and count to December 31 of the tenth following year; then ask whether the owner died on or after their required beginning date, which decides whether years one through nine carry annual withdrawals.

A hypothetical example. Nadia inherits her father's traditional IRA worth $300,000. She is 45, not disabled or chronically ill, and more than ten years younger than he was, so she is a designated beneficiary but not an eligible one — the 10-year rule applies. Her father was 79 and past his required beginning date, so Nadia owes an annual withdrawal in each of years one through nine, calculated on her own life expectancy, plus whatever remains by December 31 of year ten. Spread evenly, $300,000 ÷ 10 = $30,000 a year; and this is the important arithmetic, because her annual required withdrawal — calculated against a life expectancy measured in decades — is far less than $30,000. Meeting the annual minimum every year would therefore leave a large balance still sitting there in year ten — the two requirements have to be satisfied separately.

Change one fact and the picture changes. If her father had died at 70, before his required beginning date, Nadia would owe nothing in years one through nine and could choose which tax years absorb the income — for instance taking nothing while she is in her peak earning years and withdrawing after she retires. Same account, same beneficiary, materially different tax outcome, all turning on a date.

Pros

• Where the owner died before their required beginning date, the beneficiary controls the timing entirely within the window, which is real tax flexibility.
• The deadline is mechanical and knowable, so a ten-year withdrawal plan can be modeled the year the account is inherited.
• It is simpler to administer than a lifetime schedule that had to be recalculated every year for decades.

Cons

• Compressing a large pre-tax account into ten years can push a beneficiary into materially higher brackets, especially a beneficiary still working.
• Satisfying the annual withdrawals does not satisfy the deadline, and the gap between them is easy to miss until year ten arrives.
• It removed decades of continued tax deferral that the previous rules allowed — the arrangement informally known as the stretch IRA — which is why inherited accounts now deserve planning attention they used not to need.
• The interaction with the owner's required beginning date, and the separate treatment of minors, trusts, and estates, make this an easy area to get wrong without checking the specific facts.