Who this applies to
- You are a non-spouse, non-eligible-designated beneficiary.
- The original owner died on or after January 1, 2020.
- The owner died before their required beginning date, they had not yet started RMDs (died before April 1 of the year after turning 73, or 72/70½ under older brackets).
If the owner had started RMDs, you're under the stricter 10-year rule with annual RMDs instead.
What you have to do
Exactly one obligation: the entire account balance must be distributed by December 31 of the calendar year containing the 10th anniversary of the owner's death. (Year 1 is the calendar year after the year of death.)
There is no annual minimum. You could take nothing for nine years and everything in year 10, legally permitted, usually unwise.
The year-10 tax spike. Emptying a large traditional IRA in a single year stacks the entire distribution onto that year's income. On a $400,000 balance, that's potentially $100,000+ of extra taxable income in one year, likely at your highest marginal rate, and possibly triggering higher Medicare premiums (IRMAA) two years later. The absence of an annual requirement doesn't mean annual distributions are a bad idea.
How to use the flexibility well
- Spread it evenly. Withdrawing roughly 1/10th, then 1/9th, then 1/8th of the remaining balance each year smooths taxable income across the window.
- Time big withdrawals for low-income years. A sabbatical, early retirement, a job change, any year your other income dips is a cheaper year to pull from the inherited IRA.
- Watch the final deadline, not just the balance. The account must be at zero by Dec 31 of year 10. Set a calendar reminder for October of year 10 to confirm the final distribution is scheduled.
- Roth accounts: same clock, different tax. An inherited Roth IRA follows the same 10-year deadline, but qualified distributions are generally federal-income-tax-free, so the timing strategy matters less for taxes (though the money must still leave the tax-advantaged account).
Common mistakes
- Assuming "no annual RMD" means "no action needed." The deadline is real, and the 25% excise tax applies to any shortfall still in the account after Dec 31 of year 10.
- Using the wrong table anyway. Some beneficiaries take voluntary annual distributions and calculate them with the Uniform Lifetime Table (for your own IRA). If you're modeling voluntary withdrawals, the table doesn't matter, take what makes sense. But don't confuse a voluntary schedule with a required one.
- Forgetting the owner's year-of-death RMD. Not applicable here by definition (the owner hadn't started RMDs), but if you're unsure of the owner's RMD status, verify it. Everything hinges on that fact.
Disclaimer. Educational purposes only, not tax, legal, or financial advice. Verify with a qualified tax professional. IRS Publication 590-B is the authoritative source.