What Happens If You Don't Empty an Inherited IRA in 10 Years? The Penalty

Q: What happens if you don't empty an inherited IRA in 10 years?

Any balance remaining after December 31 of the 10th year is subject to a 25% excise tax, reduced to 10% if you correct the failure within two years by withdrawing the remaining amount and filing Form 5329.

Q: What is the 10-year rule deadline for an inherited IRA?

December 31 of the 10th calendar year after the original owner's death. If the owner died in 2023, the deadline is December 31, 2033. There is no extension and no hardship exception.

Q: Do you have to take annual RMDs during the 10-year rule?

It depends. If the original owner died on or after their required beginning date, the beneficiary must take annual RMDs in years 1 through 9 and still empty the account by year 10. If the owner died before RMDs began, only the year-10 deadline applies.

Q: How much is the penalty for missing the inherited IRA 10-year deadline?

25% of the amount that should have been withdrawn, reduced to 10% if corrected within two years. On an $80,000 remaining balance that is $20,000, or $8,000 if corrected promptly.

Q: Who is exempt from the inherited IRA 10-year rule?

Eligible designated beneficiaries: a surviving spouse, a minor child of the decedent (until age 21), a disabled or chronically ill individual, and anyone not more than 10 years younger than the decedent. They can use the life-expectancy stretch instead.

Guides · Updated October 2026

The 10-year rule sounds generous until you realize nobody sends you a reminder in year 9. The rule says the account must be empty by December 31 of the 10th calendar year after the owner's death. What happens if you don't empty an inherited IRA in 10 years? Whatever is left gets hit with a 25% excise tax, reported on Form 5329. SECURE Act 2.0 cut it from the old 50% to 25%, and it drops to 10% if you correct the failure within two years. It is a penalty you pay on money you were already going to withdraw, which is what makes it sting.

The deadline math, exactly

Count calendar years, not months. If the original owner died in 2023, your deadline is December 31, 2033. Death in January and death in December of the same year give the same deadline. There is no extension, no hardship exception, and no ability to stretch it further. The account balance must be zero when the clock stops.

One wrinkle the IRS finalized in 2024 catches people: if the original owner died on or after their required beginning date (generally age 73), you owe annual RMDs in years 1 through 9 based on your own life expectancy, and you still have to empty the account by year 10. If the owner died before RMDs began, there are no annual minimums, only the year-10 finish line. The IRS waived penalties on the annual-RMD requirement for 2021 through 2024 while everyone figured this out, but the requirement is fully in force now.

What the penalty costs on real money

Say you inherited a $200,000 traditional IRA, took distributions for nine years, and still have $80,000 sitting in the account when year 10 ends:

Balance remaining at deadline	$80,000
Excise tax at 25%	$20,000
If corrected within 2 years, at 10%	$8,000
Savings from correcting promptly	$12,000

That $20,000 is on top of the ordinary income tax you owe on the $80,000 withdrawal itself. The correction window matters: withdraw the remaining balance and file Form 5329 within two years of the missed deadline, and the penalty drops to 10%. Miss that window and 25% is the number.

The trap nobody plans for. The penalty applies to whatever is left, and "whatever is left" includes growth you never touched. An account you thought you had emptied can regenerate a balance from dividends sitting in the settlement fund. Before the deadline, confirm the account shows zero, not "basically zero."

The Roth version is kinder but not optional

Inherited Roth IRAs face the same 10-year empty-out deadline, with one big difference: qualified withdrawals come out income-tax free, so the only cost of missing the deadline is the excise tax itself, not income tax on top of it. The original owner never had RMDs, so there are no annual minimums in years 1 through 9 either. That makes the inherited Roth the one case where waiting until year 10 to drain the account is genuinely defensible, since the money grows tax free the whole time.

Who does not have to play by this rule

Eligible designated beneficiaries get the old life-expectancy stretch instead of the 10-year rule: a surviving spouse, a minor child of the decedent until age 21, a disabled or chronically ill individual, and anyone not more than 10 years younger than the person who died. If you are in one of those categories, the deadline in this article does not apply to you, though different RMD rules do. Everyone else is on the 10-year clock.

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Frequently asked questions

What happens if you don't empty an inherited IRA in 10 years?

Any balance left after December 31 of year 10 faces a 25% excise tax, reduced to 10% if you withdraw the remainder and file Form 5329 within two years.

What is the 10-year rule deadline for an inherited IRA?

December 31 of the 10th calendar year after the owner's death. If the owner died in 2023, the deadline is December 31, 2033. No extensions, no hardship exceptions.

Do you have to take annual RMDs during the 10-year rule?

Only if the original owner died on or after their required beginning date. Then you owe annual RMDs in years 1 through 9 plus the year-10 empty-out. If the owner died before RMDs began, only the year-10 deadline applies.

How much is the penalty for missing the inherited IRA 10-year deadline?

25% of the amount that should have been withdrawn, dropping to 10% if corrected within two years. On an $80,000 remaining balance that is $20,000, or $8,000 with a prompt correction.

Who is exempt from the inherited IRA 10-year rule?

Eligible designated beneficiaries: surviving spouses, minor children of the decedent (until 21), disabled or chronically ill individuals, and anyone not more than 10 years younger than the decedent. They use life-expectancy distributions instead.

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