The SECURE Act 10-Year Rule: What Every IRA Beneficiary Needs to Know

What the SECURE Act Changed

Before the SECURE Act (Setting Every Community Up for Retirement Enhancement Act), signed into law in December 2019, a designated beneficiary who inherited an IRA could take required minimum distributions (RMDs) based on their own life expectancy. This "stretch" strategy allowed the bulk of the inherited account to continue growing tax-deferred for decades.

The SECURE Act eliminated the stretch for most non-spouse beneficiaries who inherit accounts from owners who die after December 31, 2019. These beneficiaries are now subject to the 10-year rule: the entire inherited account balance must be distributed by December 31 of the 10th year following the year of the original owner's death. The account can be emptied in any pattern — all at once, evenly over 10 years, or any combination — but it must be fully distributed by the deadline.

Eligible Designated Beneficiaries: Who Is Exempt

The SECURE Act carved out five categories of beneficiaries who are exempt from the 10-year rule. These "eligible designated beneficiaries" (EDBs) can still take distributions over their own life expectancy using the stretch strategy:

Surviving spouses. A surviving spouse has the most options of any beneficiary. They can roll the inherited IRA into their own IRA, treat it as their own, take distributions over their own life expectancy, or use the 10-year rule.

Minor children of the account owner. Minor children (not grandchildren — only children) of the deceased account owner can take distributions over their own life expectancy until they reach the age of majority. At that point, the 10-year clock starts. The SECURE 2.0 Act of 2022 clarified that "age of majority" for this purpose is 21.

Disabled individuals. Beneficiaries who meet the IRS definition of disabled under IRC Section 72(m)(7) can use the stretch.

Chronically ill individuals. Beneficiaries who are chronically ill as defined under IRC Section 7702B(c)(2) can use the stretch.

Individuals not more than 10 years younger. A beneficiary who is not more than 10 years younger than the deceased account owner — such as a sibling close in age — can use the stretch.

The RMD Confusion During the 10-Year Period

One of the most misunderstood aspects of the SECURE Act is whether annual required minimum distributions are required during the 10-year period. The answer depends on whether the original account owner died before or after their required beginning date (RBD) — generally April 1 of the year after turning 73 (under SECURE 2.0).

Owner died before RBD: No annual RMDs are required during the 10-year period. The beneficiary simply must empty the account by the end of year 10. They can withdraw nothing for nine years and take the entire balance in year 10 if they choose (though this would create an enormous tax bill).

Owner died on or after RBD: Annual RMDs are required during the 10-year period, calculated using the beneficiary's life expectancy. The remaining balance must still be distributed by the end of year 10. The IRS issued final regulations in July 2024 confirming this distinction after years of confusion and penalty waivers.

This distinction is critical for tax planning. A beneficiary who is not required to take annual RMDs has more flexibility to time their withdrawals in low-income years. A beneficiary who is required to take annual RMDs must plan around a mandatory minimum each year.

The Roth Conversion Strategy

The most powerful planning response to the 10-year rule is the Roth conversion. If the original IRA owner converts traditional IRA funds to a Roth IRA before death, the beneficiary inherits a Roth IRA. The 10-year rule still applies — the beneficiary must empty the inherited Roth within 10 years — but the withdrawals are tax-free because the conversion taxes were already paid by the original owner.

This strategy is particularly effective when the original owner is in a lower tax bracket than the beneficiary will be. A retired parent in the 12% or 22% bracket can convert IRA funds to Roth, pay the tax at their lower rate, and leave the Roth to a child who would otherwise withdraw the inherited traditional IRA while in the 32% or 37% bracket.

The math is straightforward: if a parent converts $500,000 and pays $110,000 in taxes (22% bracket), the child inherits $500,000 tax-free. Without the conversion, the child inherits $500,000 in a traditional IRA and pays $185,000 in taxes (37% bracket). The Roth conversion saves the family $75,000.

Planning Strategies for the 10-Year Rule

Spread withdrawals evenly. Rather than waiting until year 10, distribute the inherited IRA evenly over the 10-year period to avoid a single massive tax hit. This keeps the beneficiary in lower brackets each year.

Time withdrawals to low-income years. If the beneficiary expects a sabbatical, career change, or early retirement, withdrawing more in those low-income years and less in high-income years can reduce the total tax burden.

Use charitable giving. Beneficiaries who are charitably inclined can use qualified charitable distributions (QCDs) from an inherited IRA after age 70 1/2 to satisfy distributions without generating taxable income.

Consider the beneficiary's state taxes. Some states have no income tax. A beneficiary who lives in (or moves to) a state with no income tax can withdraw inherited IRA funds without state tax — potentially saving 5-10% on every dollar withdrawn.

The Bottom Line

The SECURE Act fundamentally changed inherited IRA planning. The stretch IRA is gone for most beneficiaries, replaced by a 10-year rule that accelerates distributions and taxes. Families with significant retirement account balances should evaluate Roth conversions, review beneficiary designations, and develop withdrawal strategies that minimize the tax impact on the next generation. The 10-year rule cannot be avoided for most non-spouse beneficiaries — but with planning, its cost can be significantly reduced.