Inherited IRA rules changed significantly under the SECURE Act and finalized 2024 regulations. Who you are to the original owner determines how fast you must withdraw.
The 10-year rule for non-spouse beneficiaries
Most non-spouse beneficiaries who inherit an IRA must fully distribute the account by December 31 of the 10th year after the original owner's death. Under the IRS final regulations published July 2024, there is an important wrinkle: if the original owner had already reached their required beginning date and started taking RMDs, the beneficiary must also take annual RMDs in years 1 through 9, then empty the account in year 10. This annual requirement applies starting with the 2025 distribution year. If the owner died before starting RMDs, the beneficiary can withdraw on any schedule as long as the account is empty by year 10.
Eligible designated beneficiaries who are exempt
Some beneficiaries, called eligible designated beneficiaries, are exempt from the 10-year rule and may stretch distributions over their own life expectancy. These include a surviving spouse, a minor child of the original owner (until age 21, when the 10-year clock then starts), a disabled or chronically ill individual, and a beneficiary no more than 10 years younger than the deceased. Surviving spouses have additional options, including treating the IRA as their own. Because these categories are narrow and the tax stakes are high, confirm your beneficiary status before choosing a withdrawal strategy.
Get help before you take a distribution
Inherited IRA distributions are taxable income that can raise your own Medicare premiums through IRMAA. Mistakes here are costly, so it pays to plan. Call 1-800-MEDIGAP (dial 1-800-633-4427) to speak with a licensed agent about how an inherited IRA distribution may affect your Medicare costs and overall retirement income picture.