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An inherited Roth IRA can come with a tax advantage, but timing still matters. The account’s earnings are generally tax-free only after the original owner’s five-year period has been satisfied. If that clock is still running, an early withdrawal could create taxable income. Confirming the Roth’s start date first can help you understand which parts of the account are actually tax-free.1
How the 5-Year Rule Follows the Account
The five-year period generally begins with the first tax year the original owner contributed to any Roth IRA. You inherit that clock instead of starting a new one.
IRA Withdrawals and the 5-Year Rule
| Money Withdrawn | 5-Year Rule Met | 5-Year Rule Not Met |
|---|---|---|
| Regular contributions | Tax-free | Tax-free |
| Conversion amounts | Generally not taxed again | Generally not taxed again |
| Earnings | Generally tax-free | May be taxable |
Suppose the $500,000 account contains $350,000 of contributions and conversion amounts plus $150,000 of earnings. If you withdraw the entire balance before the five-year period ends, that $150,000 of earnings could be included in taxable income.
It’s worth noting, however, that the 10% early-withdrawal penalty generally does not apply to distributions made after the owner’s death.
Timing Withdrawals Under the 10-Year Rule
Most non-spouse beneficiaries must empty an inherited Roth IRA by the end of the 10th year after death. 2 Because Roth owners are treated as dying before their required beginning date, beneficiaries subject only to the 10-year rule generally do not have to take annual withdrawals before Year 10. That can matter when the five-year clock is unfinished.
IRA Withdrawal Options Depending on Beneficiary Status
| Beneficiary | General Options | Distribution Deadline |
|---|---|---|
| Surviving spouse | Treat as own or use beneficiary rules | Depends on choice |
| Owner’s minor child | Life-expectancy payments initially | 10-year clock after age of majority (21) |
| Disabled/chronically ill heir | Life expectancy or qualifying 10-year method | Depends on method |
| Not more than 10 years younger | Life expectancy or qualifying 10-year method | Depends on method |
| Other individual heir | 10-year rule | End of Year 10 |
Eligible designated beneficiaries have additional options that ordinary non-spouse heirs do not.
If the original Roth is only three years old, for example, waiting until its five-year period is satisfied before tapping earnings may preserve their tax-free treatment while still leaving time to meet the beneficiary deadline.
A financial advisor working with your tax professional can help verify both dates before you decide when a $500,000 inherited Roth should start funding your own goals.
The Mistakes That Can Make an Inherited Roth More Expensive
Inherited Roth IRA Mistakes to Avoid
| Mistake | What Could Happen | What to Check |
|---|---|---|
| Withdrawing earnings too early | Earnings may become taxable | Original Roth start year |
| Missing the final distribution deadline | Excise tax may apply | Beneficiary deadline |
| Spouse ignores available elections | May choose less favorable treatment | Spouse beneficiary options |
| No record of Roth history | Harder to establish five-year status | Forms 5498 and custodian records |
Failing to take a required distribution can trigger a 25% excise tax on the shortfall, potentially reduced to 10% when corrected within two years.
This is why it’s important to know the original owner’s five-year start date before withdrawing earnings. A financial advisor and tax professional can then coordinate that date with your beneficiary deadline and decide when the Roth fits into your broader retirement-income plan.
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Article Sources
All articles are reviewed and updated by SmartAsset’s fact-checkers for accuracy. Visit our Editorial Policy for more details on our overall journalistic standards.
- Viewpoints, Fidelity. “What Is the Roth IRA 5-Year Rule and How Does It Work? | Fidelity.” Fidelity.Com, Jan. 9, 2026, https://www.fidelity.com/learning-center/personal-finance/retirement/roth-ira-5-year-rule.
- “Retirement Topics – Beneficiary | Internal Revenue Service.” Home, https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary. Accessed Oct. 5, 2026.