Inherited IRA and 401(k) Rules: What Beneficiaries Need to Know in 2026

The 10-Year Rule for Inherited IRAs and 401(k)s

For many non-spouse designated beneficiaries, the 10-year rule is a key deadline to understand. It requires that the entire balance of an inherited IRA or 401(k) be withdrawn by December 31 of the year that marks the tenth anniversary of the original account owner’s death. For a designated beneficiary subject to the 10-year rule, annual required minimum distributions generally apply during the 10-year period if the original owner died on or after their required beginning date. If the owner died before that date, annual distributions generally are not required before the final year.

The rule applies to most non-spouse beneficiaries of traditional and Roth IRAs and defined contribution plans such as 401(k)s, including adult children, siblings, and other individuals named as beneficiaries who do not qualify as an eligible designated beneficiary. For inherited Roth IRAs, the original owner is treated as having died before the required beginning date, so beneficiaries subject to the 10-year rule generally do not have annual RMDs during the window, although the account still must be fully distributed by the applicable deadline.

Eligible designated beneficiaries, including surviving spouses, the account owner’s minor child, certain disabled or chronically ill individuals, and individuals not more than 10 years younger than the owner, may have different distribution options.

Missing the December 31 deadline in the tenth year may result in an excise tax on amounts that were required to be distributed but remained in the account. Waiting until late in the 10-year period may also concentrate taxable distributions into fewer years for traditional accounts. Planning distributions earlier can help beneficiaries evaluate those tax considerations while meeting applicable RMD requirements.

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Required Minimum Distributions Within the 10-Year Window

For designated beneficiaries subject to the 10-year rule, annual required minimum distributions are generally required during the 10-year window if the original account owner died on or after their required beginning date. Final IRS regulations applying to RMDs beginning in 2025 require those annual distributions while also requiring the remaining account balance to be fully distributed by the end of the 10th year.

The IRS provided transition relief from the excise tax for certain missed annual beneficiary RMDs through 2024, which helps explain why beneficiaries may encounter older guidance suggesting that no annual distributions were required during the 10-year period.

A beneficiary who assumes they can simply wait until year ten to take any withdrawal, when the original owner died on or after their required beginning date, may miss required annual distributions and potentially owe an excise tax. If the original owner died before their required beginning date, annual distributions generally are not required under the 10-year rule before the final year, although the account must still be fully distributed by the applicable deadline.

Because whether annual RMDs apply depends on the original account owner’s required beginning date and the beneficiary rules that apply, this is one of the first questions to resolve with the plan administrator or custodian after you inherit the account.

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Spouse vs. Non-Spouse: The Decision Logic

The table above outlines the primary paths available to spouses and non-spouses, but the right choice within those paths depends on individual circumstances.

For a surviving spouse, the available options may include keeping the account inherited or, when eligible, treating an inherited IRA as their own or rolling eligible assets into an account of their own, depending on the account type and applicable rules. Treating the assets as your own means your own RMD rules generally apply, but it may also affect access to the money before age 59½.

Keeping the account as an inherited IRA instead can make sense if you are younger and may need access before age 59½ because distributions received as a beneficiary after the account owner’s death generally qualify for an exception to the 10% additional tax on early distributions.

For a non-spouse beneficiary, inherited assets generally cannot be rolled into an IRA in the beneficiary’s own name. A non-spouse beneficiary may keep assets in an inherited employer plan if the plan permits or use a direct rollover to a properly established inherited IRA. For a designated beneficiary who is not an eligible designated beneficiary, the 10-year rule governs how quickly the inherited account generally must be fully distributed.

Within that constraint, the main decision is timing: whether to spread withdrawals across multiple years, take more in lower-income years, or defer more of the balance until later in the window, while also accounting for any annual RMDs that may apply. That choice should be weighed against your current and expected tax brackets, since larger taxable distributions from traditional accounts may increase taxable income and affect your marginal tax rate in a given year.

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How Inherited Roth IRAs Are Treated

For most non-spouse designated beneficiaries who are not eligible designated beneficiaries, an inherited Roth IRA follows the 10-year rule, meaning the account generally must be fully distributed by December 31 of the year containing the 10th anniversary of the original owner’s death. What sets it apart is how the withdrawals are taxed.

Because Roth contributions are made with after-tax dollars, qualified distributions from an inherited Roth IRA are generally free from federal income tax. For distributions to a beneficiary after the owner’s death, the five-year requirement for a qualified distribution is measured from the first tax year for which the original owner made a contribution to a Roth IRA. If that five-year period has not been met, the portion of a distribution attributable to earnings may be taxable, while amounts attributable to regular contributions generally are not included in income.

Another key difference is that annual RMDs generally do not apply during the 10-year window for beneficiaries subject to that rule. A Roth IRA owner is treated as having died before their required beginning date, so no distribution is generally required before the end of the 10th year. The account still needs to reach zero by the end of year ten.

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Eligible Designated Beneficiary Categories

Not every beneficiary is subject to the 10-year rule. The SECURE Act created a category called eligible designated beneficiaries, who may qualify to take distributions based on life expectancy rather than following the standard 10-year rule. This group includes surviving spouses, minor children of the original account owner, individuals who are disabled or chronically ill, and beneficiaries who are not more than 10 years younger than the original owner.

The minor child exception is time-limited. A minor child of the original account owner can use the life expectancy method only until they reach the age of majority, which is age 21 for these rules. Once the child reaches age 21, the 10-year period begins, and the remaining account balance generally must be fully distributed by the end of the 10th year after that date.

Eligible designated beneficiary status is determined based on the applicable category and, for disability or chronic illness, generally depends on whether the beneficiary met the relevant requirements as of the original owner’s death. Because these rules can affect both annual distributions and the final distribution deadline, it is worth confirming your category with the plan administrator or IRA custodian before assuming which set of rules applies to you.

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FAQ 1: What is the difference between inheriting a 401(k) and an IRA?

When you inherit a 401(k) or an IRA, many of the same federal beneficiary distribution rules may apply, but the accounts are administered differently. A 401(k) is an employer-sponsored plan, so distributions are handled through the plan administrator and available options may depend on the plan’s terms. An IRA, by contrast, is held by an IRA custodian, and investment choices depend on the IRA custodian and the investments available through that institution.

Many of the federal beneficiary distribution rules, including the 10-year rule for designated beneficiaries who are not eligible designated beneficiaries, can apply to both inherited IRAs and 401(k)s. However, an inherited 401(k) may also be subject to the employer plan’s specific distribution options. Understanding who manages the account and what options are available can help you see how each inherited account fits into your overall financial picture.

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FAQ 2: How did the SECURE Act change the rules for inherited retirement accounts?

The SECURE Act, which took effect in 2020, changed the distribution rules for many inherited 401(k)s and IRAs. For many non-spouse designated beneficiaries, it eliminated the ability to “stretch” withdrawals over a lifetime and replaced it with a 10-year rule. For beneficiaries subject to this rule, the inherited account generally must be fully distributed by the end of the tenth year following the original owner’s death.

In addition, beginning in 2025, designated beneficiaries subject to the 10-year rule generally must take annual required minimum distributions during that period when the original account owner died on or after their required beginning date. There are important exceptions for certain eligible designated beneficiaries, including surviving spouses, minor children of the original account owner until age 21, certain individuals with disabilities or chronic illness, and beneficiaries who are not more than 10 years younger than the original owner.

Understanding which beneficiary category applies is important because it can affect both annual distribution requirements and the deadline for fully distributing the account.

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FAQ 3: What options are available if I inherit my spouse’s 401(k) or IRA?

As a surviving spouse, you generally have additional options that may not be available to non-spouse beneficiaries when inheriting a 401(k) or IRA. For an inherited IRA, a surviving spouse who is the sole beneficiary may be able to treat the IRA as their own or roll it into their own IRA. For an inherited 401(k), available options depend on the plan’s terms, and a surviving spouse may be able to roll eligible assets into their own IRA or another eligible retirement plan.

Once inherited assets are treated as or rolled into your own retirement account, the distribution rules for that account generally apply to you as the owner, including applicable RMD rules. Tax treatment depends on whether the inherited assets are traditional or Roth and on the type of distribution involved.

Another option may be to keep an IRA as an inherited account or leave inherited 401(k) assets in the employer plan if the plan permits. Keeping the account inherited may be useful in certain situations, such as if you are under age 59½ and need access to the funds before deciding whether to treat the assets as your own. Distributions received as a beneficiary because of the account owner’s death generally qualify for an exception to the 10% additional tax on early distributions.

The right choice depends on your age, income needs, the type of inherited account, applicable RMD rules, the employer plan’s terms when a 401(k) is involved, and overall retirement picture. Reviewing these factors can help you evaluate how the inherited account fits with the rest of your financial plan.

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FAQ 4: Can a surviving spouse roll an inherited 401(k) into their own IRA?

Yes. A surviving spouse may generally roll an eligible distribution from an inherited 401(k) into their own IRA, subject to the plan’s terms and applicable rollover rules. Once the assets are held in the spouse’s own IRA, the RMD rules that apply to the spouse as the account owner generally apply. Tax treatment depends on whether the inherited assets are traditional or Roth and on the type of distribution involved.

A direct rollover from the employer plan to the receiving IRA can generally move eligible assets without the distribution being paid to the spouse first. This approach can help simplify retirement planning by consolidating accounts and applying the distribution rules of the receiving IRA. However, whether a rollover is appropriate depends on factors such as age, income needs, account type, plan terms, RMD timing, and access to funds, which is why reviewing the option in the context of your overall plan is important.

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FAQ 5: What is the 10-year rule for non-spouse beneficiaries of inherited retirement accounts?

For many non-spouse designated beneficiaries, the 10-year rule requires that the entire balance of an inherited 401(k) or IRA be fully distributed by December 31 of the year marking the tenth anniversary of the original owner’s death. The timing of distributions within that window depends in part on whether annual RMDs are required.

If the original account owner died on or after their required beginning date, designated beneficiaries subject to the 10-year rule generally must take annual required minimum distributions during the 10-year period, with the remaining balance withdrawn by the end of year ten.

If the owner died before their required beginning date, annual distributions generally are not required before the final year. How and when you take distributions may affect your taxable income, particularly for traditional accounts, so distribution timing should be considered as part of your broader tax and financial plan.

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FAQ 6: How does the 10-year rule apply to an inherited Roth IRA?

For most non-spouse designated beneficiaries who are not eligible designated beneficiaries, an inherited Roth IRA is generally subject to the 10-year rule, meaning the account generally must be fully distributed by December 31 of the year marking the tenth anniversary of the original owner’s death. The key difference is how distributions are taxed.

Because Roth contributions were made with after-tax dollars, qualified withdrawals from an inherited Roth IRA are typically free from federal income tax once the applicable five-year requirement has been satisfied.

For inherited Roth IRAs subject to the 10-year rule, annual required minimum distributions are generally not required during the 10-year period. For purposes of the 10-year rule, a Roth IRA owner is treated as having died before their required beginning date, so distributions generally are not required before the final year of the 10-year period. This flexibility can make withdrawal timing an important planning decision, especially when coordinating with other income sources.

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FAQ 7: How are distributions from an inherited traditional 401(k) taxed for non-spouse beneficiaries?

If you inherit a traditional 401(k) as a non-spouse beneficiary, distributions are generally taxed as ordinary income in the year you take them to the extent they consist of pre-tax contributions and earnings. Any after-tax basis in the account may affect how much of a distribution is taxable.

Under current rules, many non-spouse designated beneficiaries who are not eligible designated beneficiaries must withdraw the full balance within 10 years of the original owner’s death, and taxable amounts distributed during that period are generally included in income for the year received.

How and when you take distributions matters. Large withdrawals in a single year can increase your taxable income and potentially place some income in a higher marginal tax bracket. Spreading distributions across multiple years may reduce the concentration of taxable income in a single year, but the tax effect depends on your income, applicable RMD requirements, and other circumstances. Consider these decisions alongside your other income sources and broader tax and financial plan.

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FAQ 8: Who qualifies for an exception to the 10-year rule on inherited retirement accounts?

Surviving spouses, the original account owner’s minor children, certain disabled or chronically ill individuals, and beneficiaries who are no more than 10 years younger than the original account owner may qualify as eligible designated beneficiaries. These beneficiaries may be able to take distributions based on life expectancy rather than following the standard 10-year rule.

That said, these exceptions are not permanent in all cases. For example, an eligible designated beneficiary who qualifies as the original account owner’s minor child generally becomes subject to the 10-year rule upon reaching age 21.

The remaining account generally must then be fully distributed by the end of the 10th year after the beneficiary reaches age 21. Because these rules depend on the beneficiary category and applicable circumstances, it’s important to confirm which category applies before planning withdrawals.

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FAQ 9: What should I consider when planning distributions from an inherited 401(k) or IRA?

When you’re planning distributions from an inherited 401(k) or IRA, start by confirming your beneficiary category, whether the 10-year rule applies, and whether annual RMDs are required. Then consider how withdrawals may affect your income and taxes over time. Consider your current and expected tax bracket, whether the account is traditional or Roth, and how these withdrawals fit alongside your other income sources.

With a traditional inherited account, spreading distributions across the 10-year window may reduce the concentration of taxable income in a single year, subject to any annual RMDs that apply. With an inherited Roth IRA, qualified distributions are generally free from federal income tax, subject to the applicable five-year requirement. For beneficiaries subject to the 10-year rule, annual RMDs generally do not apply during the window, but the account must still be fully distributed by the applicable deadline.

It’s also important to think about your needs and priorities. You may need some of the funds sooner, or you may prefer to leave assets invested longer for potential growth. Reviewing distribution timing in the context of your full financial picture can help you weigh current cash-flow needs, tax considerations, applicable distribution requirements, and long-term goals.

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FAQ 10: When does it make sense to seek guidance for an inherited 401(k) or IRA?

It may be helpful to seek guidance early after you inherit a 401(k) or IRA, particularly before taking distributions or making account changes. The rules around inherited retirement accounts are complex, especially after the SECURE Act, and early decisions may affect taxes, distribution timing, and your broader financial plan. Timing, beneficiary status, and distribution strategy can affect taxable income and cash flow.

At Liberty One Wealth Advisors, we help you understand your options within the context of your full financial picture. That includes reviewing inherited account rules, considering distribution timing alongside your existing income and tax situation, and considering how the account fits into your broader financial plan. The goal is not to rush decisions, but to help you move forward with clarity and confidence during what is often a stressful time.

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