I Just Inherited a Roth IRA. Does the 10-Year Rule Still Apply, Even Though It's Tax-Free?

You may inherit a Roth IRA and think you can leave the money invested indefinitely because qualified withdrawals are generally tax-free. Tax-free withdrawals do not eliminate the IRS rules for inherited accounts. In most cases, non-spouse beneficiaries must empty an inherited Roth IRA within a set period of time. Missing that deadline can lead to penalties, even if you never owed taxes on the withdrawals.

Tax-Free Doesn’t Mean Rule-Free

The 10-year rule applies to most non-spouse beneficiaries who inherit a Roth IRA from someone who died in 2020 or later. The account generally must be emptied by the end of the 10th year after the original owner’s death, even though qualified withdrawals are generally tax-free.

Some beneficiaries qualify for different distribution rules. These include surviving spouses, eligible designated beneficiaries, certain minor children of the original owner, disabled or chronically ill individuals, and beneficiaries who are no more than 10 years younger than the original owner.

The IRS treats taxes and distribution deadlines as separate issues. Qualified Roth IRA withdrawals are generally tax-free, while the SECURE Act determines how long you have to withdraw the money. Missing the distribution deadline can result in penalties, even if no income tax is due on the withdrawals.

What Missing the Deadline on a Roth IRA Could Cost

Most non-spouse beneficiaries who inherit a Roth IRA must empty the account by the end of the 10th year after the original owner’s death. Because Roth IRA owners are not subject to lifetime required minimum distributions (RMDs), beneficiaries generally do not have to take annual withdrawals during the first nine years. The account simply must be empty by the deadline.

For example, suppose you inherit a $200,000 Roth IRA in 2026. You generally have until December 31, 2036, to withdraw the entire balance. If you miss that deadline, the IRS can impose an excise tax on the amount that should have been withdrawn.

Scenario	Amount That Should Have Been Withdrawn	Penalty Rate	Estimated Penalty
Miss the deadline entirely	$200,000	25%	$50,000
Miss the deadline, but correct it within two years	$200,000	10%	$20,000
Empty the account on time	$200,000	0%	$0

The penalty is separate from income taxes. Qualified Roth IRA withdrawals are generally tax-free, but failing to empty the account on time can still result in a substantial excise tax. Correcting the mistake within two years can reduce the penalty, but withdrawing the full balance before the deadline is the only way to avoid it altogether.

A financial advisor can help you build a withdrawal schedule before the 10-year deadline arrives.

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How to Use the 10-Year Window

Qualified Roth IRA withdrawals are generally tax-free, but failing to empty the account on time can still result in a substantial excise tax.

The 10-year deadline gives you flexibility, not urgency. Because qualified Roth IRA withdrawals are generally tax-free, many beneficiaries leave the money invested as long as possible, letting it grow tax-free right up until the account has to be emptied.

Waiting until year 10 isn’t the only option, though. Spreading withdrawals across several years can make sense if you’d rather have earlier access to some of the money, or simply don’t want to manage one large withdrawal at the deadline. A financial advisor can help you build a withdrawal strategy that fits your needs while making sure the account is fully distributed before that deadline arrives.

Tips for Estate Planning

Estate planning can be complicated, but a financial advisor may be able to help. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Inheritance isn’t usually considered income, but certain types of inherited assets can have tax implications. Before you spend or invest your inheritance, read more inheritance taxes and exemptions.