We have seen this scene a lot. A client comes in with a folder, an account statement on top.

Her father had died recently. He'd left around $2 million across her and three siblings, so her share had landed in her name a few weeks after the funeral. She kept coming back to her father, and to the way he had spent his last years.

He had barely enjoyed his retirement. He'd spent most of his time quietly preserving assets, declining the cruise his wife had pushed for, treating every dollar like something that belonged to his kids before he was done with it. When she received the inherited accounts, she sat in our office and said something I am still thinking about. "I just don't understand why he didn't spend any of this."

It was telling. The conversation that followed started with her, and with her own children, now that the question had landed in her hands.

What the 10-Year Rule Actually Says Now

The post-SECURE Act inherited IRA rules took a long time to settle. The original Act passed in late 2019 and changed the math for non-spouse beneficiaries overnight. The IRS then issued proposed regulations, walked them back, issued a series of waivers covering 2021 through 2024, and finally landed on final regulations in July of 2024. That is when the dust actually settled, and 2025 was the first year the rule was enforced as written.

Here is what the dust looks like. If you inherit a traditional IRA from someone who was already taking required minimum distributions when they died, you are a "designated beneficiary," and you are subject to two requirements at the same time. You have to take an annual withdrawal in each of the next ten years, calculated against your own life expectancy. And by December 31 of the tenth year after the year of death, the account has to be empty.

If the original owner died before reaching their RMD start date (now age 73 under current law), you still have the ten-year window, but you are not required to take a withdrawal in any particular year inside it. You can wait until year ten if you want. Most people probably should not, for tax-bracket reasons we will get to, though the rule allows it.

Surviving spouses are different. A spouse can roll the inherited account into their own IRA and follow the regular rules. Minor children of the decedent, disabled or chronically ill beneficiaries, and beneficiaries less than ten years younger than the decedent each have their own exceptions. For most of the people reading this, though, the ten-year rule is what is in front of them.

The Deeper Question Your Parents Left You With

When your parents put money into an IRA forty years ago, the deeper motive was almost always you, eventually, even if they would not have said it that way. The decision to save instead of spend, across decades of small monthly deposits, was already a decision about something other than themselves.

When that account lands in your name, the question underneath the tax form is, what did they trust me to do with this? Sometimes the answer is straightforward. They wanted you to be okay, and the account is part of how they made sure of it. Sometimes the answer is more complicated. They didn't get to finish whatever story they were telling with their savings, and now you are holding the last chapter.

The ten-year window the IRS gives you is, by accident or by design, a reasonable amount of time to think about that.

Jesus is talking about responsibility broadly here, in a context that reaches far beyond any single inheritance. Applied to a beneficiary in this specific spot, though, the wisdom carries cleanly. What you have been handed sits on a different footing than what you have earned, and what you do with it is part of the assignment.

What the Math Actually Looks Like Across Ten Years

Let me walk through what the math looks like, with numbers chosen to be illustrative. Your situation will be different. Use the numbers below to see the shape of the decision.

Say you inherited $400,000 in a traditional IRA from a parent who had already started their RMDs. You are 45. Your household is in the 24% federal tax bracket and looks like it will stay there or climb into the 32% bracket over the next decade as your career compounds. You live in a state with an income tax. You are a saver, you are already maxing your 401(k), and you do not actually need the inherited money for spending.

The instinct most people have is to delay the withdrawals. Wait until year nine or year ten, let the account grow, take it all out at the end. The math does not reward you for that.

If you let a $400,000 account grow at 7% a year for ten years and then withdraw it all in year ten, you are pulling out around $787,000 in a single year. That is almost certainly bumping you up two tax brackets, possibly into the 37% top federal bracket on the portion above the cutoff. Your effective tax rate on the inherited money could end up at 30% or higher, plus state tax, plus you may have triggered IRMAA surcharges if you are nearing Medicare.

Here is the alternative. You take roughly $40,000 a year, every year, for ten years. Each $40,000 withdrawal stays inside your current bracket, or just barely nudges into the next one. The growth happens outside the inherited account. You reinvest in your taxable accounts, you increase your Roth contributions, you set aside money for your own kids' education. Your effective tax rate on the inherited money settles closer to 24%, sometimes less.

The difference between those two paths, on a $400,000 inherited account, is often six figures of after-tax dollars, with the exact number depending on your state, your career trajectory, and the markets along the way.

Where Coordinated Planning Changes the Outcome

The right way to handle an inherited IRA is one decision a year, every year, for ten years.

Each year's decision touches several things at once: how much you take, where it lands in your own tax picture, what it does to your IRMAA bracket if you are close to Medicare, whether you should increase your own retirement contributions to offset the income, and what it looks like alongside any Roth conversions you might be doing in the same window. Each of those questions belongs to a different specialty if you have your professionals scattered. Inside one firm, they are the same conversation.

That kind of decision usually does not get made well when your tax preparer, your financial planner, and your investment advisor are three different people in three different offices, talking to you separately and not to each other. The information moves through you, in pieces, often months apart. By the time everyone catches up, the year is over, and you have already taken what you have taken.

Inside Sound Wealth, that conversation happens once a year, with everyone at the same table. The planner is running the ten-year projection. Sound Tax is modeling what each year's withdrawal does to your federal and state return. Investment management is positioning the inherited account itself so that the asset mix matches the time horizon, which looks different from a normal retirement account because the clock is finite.

I mean that sincerely. The coordination is the actual mechanism that turns a ten-year question into ten annual decisions, with each one informed by the previous nine and the one ahead.

A Frame for the Decision

Let me come back to the woman with the folder.

By the time we had been talking for an hour, the IRA statement was still on the table, but the conversation had shifted. She told me about a vacation her father had put off twice, about the things he used to say about wanting to leave the kids more than enough, about a quiet pattern of giving he had kept up at his church for thirty years that none of the four kids had known about until they went through his accounts. The inheritance had a shape to it that was older than the IRA.

What we built, in that hour, was a question for her to live with for a month: what do you actually believe this is for? The withdrawal schedule came later, once the first question had been answered for herself. The answer she came back with had more than one piece. Some of it replenished her own retirement savings. Some of it went into education accounts for her own kids. Some of it continued her father's quiet support of the same church, in his name, at roughly the same dollar amount each year through the ten-year window.

The window did its work. It gave her room.

If you have inherited something in the last few years and the ten-year window is already running, the kindest thing I can tell you is that you still have time to make the next nine years intentional, even if the first one or two were reactive. And if you skipped a 2025 distribution, the IRS has built a path back for you, with the excise tax reducible from 25% to 10% if you correct it within the two-year window.

If any of this resonates, we'd genuinely love to walk through what it looks like for you. One step at a time, no rush. And if you know someone who is a year or two into the clock without anyone helping them think about it, this is the kind of post worth forwarding.

Common Questions About Inherited IRAs

How does the 10-year rule for an inherited IRA work in 2026?

Most non-spouse beneficiaries who inherit a traditional IRA after 2019 must fully empty the account by December 31 of the tenth year after the year of death. If the original owner had already begun required minimum distributions (which now start at age 73 under current law), the beneficiary also has to take an annual RMD each year inside the ten-year window, calculated against the beneficiary's own life expectancy. Final IRS regulations confirmed this dual requirement in July 2024, and 2025 was the first enforcement year.

Do I have to take annual RMDs from an inherited IRA?

It depends on whether the original owner had reached their RMD start date. If your parent (or other non-spouse decedent) was past age 73 and was already taking distributions when they died, yes, you must take an annual withdrawal each year through the ten-year window. If they died before their RMD start date, you can choose to wait, take some years and skip others, or distribute evenly, as long as the account is fully empty by year ten.

What happens if I skipped my first inherited IRA RMD in 2025?

The penalty for a missed required distribution is a 25% excise tax on the amount you should have taken. SECURE 2.0 added a reduction to 10% if you correct the missed distribution within a two-year window, take out the amount you should have taken, and file Form 5329 explaining the correction. That means if you skipped a 2025 distribution, you generally have until the end of 2027 to take it and pay the reduced penalty, though we would recommend doing it sooner rather than later.

Can I roll an inherited IRA into my own IRA?

Surviving spouses can. Non-spouse beneficiaries cannot. Attempting to roll a non-spouse inherited IRA into your own retirement account is treated as a full distribution, meaning the entire account becomes taxable income in that year. The inherited account has to remain titled as an inherited IRA, separate from your own retirement accounts, until it is emptied at the end of year ten.

This article is for educational purposes and does not constitute individualized tax, legal, or investment advice. Inherited IRA rules are nuanced, your specific situation will vary, and the right course of action depends on facts and circumstances we cannot anticipate from a blog post. Sound Wealth LLC is a state-registered investment advisor in New Jersey, Pennsylvania, Illinois, and Texas. Past performance is not indicative of future results.