Inherited IRA & TSP: the 10-year rule for your heirs

1. The end of the stretch IRA

For decades, inheriting a retirement account came with a quiet superpower: the “stretch IRA.” A child who inherited a parent’s IRA could take tiny required distributions over their own life expectancy — decades of continued tax-deferred growth, with only a trickle taxed each year. The SECURE Act of 2019 ended that for most heirs. In its place came the 10-year rule: the entire inherited account must be emptied within 10 years of the owner’s death.

The change was a significant tax hit, because compressing decades of distributions into a single decade can push your heirs into much higher brackets — especially adult children inheriting in their peak earning years. Understanding the rule is now a core part of estate and tax planning, not an afterthought. And in 2026 it matters more than ever, because the IRS has finally started enforcing the trickiest part of it.

2. The 10-year rule, plainly

The core rule is simple to state: if you’re a non-spouse beneficiary inheriting from someone who died after 2019, the inherited account must be fully distributed by December 31 of the 10th year after the owner’s death. Inherit in 2026, and the account must be empty by December 31, 2036. You get the partial year of death plus 10 full calendar years.

It applies broadly — traditional IRAs, Roth IRAs, SEP and SIMPLE IRAs, and most inherited 401(k) and TSP accounts. What the basic rule doesn’t tell you is whether you must take money out each year along the way, or whether you can wait and pull it all in year 10. That single question is where most beneficiaries go wrong — and it’s the subject of the next section.

3. The annual-RMD trap

When the SECURE Act passed, almost everyone assumed the 10-year rule meant “empty it by year 10, on whatever schedule you like.” Then the IRS surprised practitioners: in some cases, beneficiaries must also take annual required distributions in years one through nine — not just clean out the account by the end. After years of confusion and waived penalties, the IRS finalized the rules in July 2024 and began enforcing them with the 2025 distribution year. The deciding factor is whether the original owner had already started their own RMDs:

This matters because the penalty for missing an inherited RMD is steep: SECURE 2.0 set it at 25% of the amount you should have taken (reduced to 10% if you correct it within a roughly two-year window). The IRS waived penalties for missed RMDs from 2021 through 2024 while it finalized the rules — but that grace period is over. Starting with 2025, a beneficiary who skips a required annual distribution can owe the full excise tax.

4. Who’s exempt: eligible designated beneficiaries

Not everyone is bound by the 10-year cleanout. A special class called eligible designated beneficiaries (EDBs) can still stretch distributions over their life expectancy — the old superpower survives for them. There are five categories:

Everyone else — most notably adult children who are more than 10 years younger than their parent — is a non-eligible designated beneficiary, fully subject to the 10-year rule. That’s the most common inheritance scenario, which is why the 10-year rule gets so much attention.

5. Find your rule

Answer three quick questions and the finder below tells you which rule applies to your inherited account: stretch or 10-year, whether annual RMDs are required, your empty-by deadline, and the tax treatment.

6. Inherited Roth: same deadline, no annual RMDs

An inherited Roth IRA is the bright spot. For most non-spouse beneficiaries it’s still subject to the 10-year cleanout, but the distributions are generally income-tax-free, because the original owner already paid the tax. And because Roth owners never face lifetime RMDs, there are no annual RMDs for the beneficiary either during the 10 years.

That combination creates a clear optimal strategy: let an inherited Roth grow untouched for the full 10 years, then withdraw it all tax-free at the end. You get a decade of additional tax-free compounding and pay nothing on the way out. It’s the rare case where the right move is simply to wait — the opposite of the year-by-year discipline a traditional inherited account often demands.

7. The TSP catch

Here’s the part that blindsides federal families: a non-spouse heir generally cannot keep an inherited TSP inside the Thrift Savings Plan. A surviving spouse can — through a beneficiary participant account — but a child or other non-spouse beneficiary faces only two choices from the TSP: take the death benefit as a taxable lump-sum payment, or directly transfer it to an inherited IRA.

That distinction is enormous. A lump-sum payout of a large TSP balance can land entirely in one tax year, potentially taxing a big chunk of it at the top marginal rate. To get the flexibility of spreading withdrawals across the 10-year window — and to manage the brackets — a non-spouse heir usually needs to transfer the TSP into an inherited IRA promptly, before the TSP forces a distribution. If you’re a federal employee, make sure your heirs know this in advance; it’s the difference between a managed 10-year drawdown and an avoidable one-year tax bomb.

8. Tax strategy: spreading the hit

For a taxable inherited account under the 10-year rule, the goal is to avoid a giant final-year withdrawal that spikes your bracket. A few principles help:

Spread withdrawals deliberately across the 10 years to fill up your lower brackets each year rather than emptying the account in one taxable lump. Take more in low-income years — a year between jobs, an early-retirement gap year, or any year your other income dips — and less when your income is high. Mind your own thresholds: a large inherited distribution can push you over an IRMAA cliff or into the next bracket, so model the whole decade rather than reacting year to year. And remember the asymmetry: an inherited Roth should usually be left alone until year 10, while an inherited traditional account usually rewards steady annual withdrawals. Planning the drawdown is itself a multi-year tax strategy — one worth coordinating with a CPA.

9. Frequently asked questions