Inherited IRA 5-Year Rule vs 10-Year Rule: Which Clock Are You On?
Most articles about the inherited IRA 5-year rule vs 10-year rule tell you the 5-year rule is dead, and most beneficiaries can stop reading there. If you inherited from a parent after 2019, you are on the 10-year clock: empty the account by December 31 of the tenth year after the death. But the 5-year rule did not die. It moved into the corners, estates, charities, trusts that do not qualify, and deaths before 2020, and the corners are exactly where people get surprised, because nobody told them a second clock still existed.
The history is short. Before the SECURE Act, a non-spouse beneficiary could stretch distributions over their own life expectancy, or, if the owner died before their required beginning date, choose the 5-year rule instead: take nothing for four years, then empty the account by the end of year five. The SECURE Act, effective for deaths after December 31, 2019, killed the stretch for most beneficiaries and installed the 10-year rule in its place. The 5-year rule survived only where the 10-year rule does not reach.
The decision rules: which clock you are on
Run these in order. First, when did the owner die? If before 2020, the old regime governs: life expectancy payouts, or the 5-year rule if the owner died before their required beginning date and the beneficiary chose it. The SECURE Act does not reach backward, and the IRS confirmed this in its 2024 final regulations.
Second, who is the beneficiary? If it is an eligible designated beneficiary, a surviving spouse, a minor child, someone disabled or chronically ill, or someone not more than ten years younger than the owner, the 10-year rule does not apply at all. EDBs use the life expectancy method, which is the closest thing left to the old stretch.
Third, if the death was after 2019 and the beneficiary is an individual who is not an EDB, you are on the 10-year clock. Empty the account by December 31 of year ten. One refinement people miss: if the owner died on or after their required beginning date, annual RMDs are required in years 1 through 9 as well, not just the final emptying. The 10-year rule is not always "take nothing for nine years, then everything."
Fourth, the 5-year corner. If the beneficiary is not an individual, an estate, a charity, a trust that fails the see-through rules, the 10-year rule never attached, because it was written for human beneficiaries. For a traditional IRA where the owner died before their required beginning date, that non-individual beneficiary is on the 5-year rule: everything out by December 31 of year five. This is the case that blindsides executors. The estate inherits a $400,000 IRA, nobody realizes the 5-year clock started at death, and year five arrives with a six-figure taxable distribution nobody planned for.
| Strategy | Annual taxable income |
|---|---|
| Spread evenly over 10 years | $30,000/yr |
| Wait until year 10, then everything | $300,000 in one year |
| Estate on 5-year rule, discovered in year 4 | $150,000/yr for 2 years |
Simplified, ignoring growth. The year-10 lump sum can shove a beneficiary two brackets higher for a single year. The discovered-too-late 5-year case is worse: half the time to plan, at estate tax rates.
On the 10-year clock and planning withdrawals?
Model the annual RMDs and the year-10 deadline before you touch the money.
Calculate your inherited IRA RMDs freeThe other 5-year rule hiding inside Roth inheritances
The Roth version deserves its own paragraph, because it confuses even professionals. There are two different 5-year rules, and an inherited Roth IRA can involve both. The distribution 5-year rule above governs how fast a non-individual beneficiary must empty an inherited Roth IRA. The holding-period 5-year rule governs whether the earnings come out tax-free: the original owner's Roth must have been open at least five years, and that clock uses the original owner's start date, not the date you inherited. A parent who opened a Roth in 2018 and died in 2022 left you a satisfied holding period. A parent who opened one in 2021 and died in 2022 did not, and earnings withdrawn before 2026 are taxable even though the account is inherited. Same phrase, "5-year rule," two unrelated clocks, one account. Ask which one anyone means before you act on advice about it.
The penalty for getting any of this wrong is not theoretical. Amounts that should have come out but did not face a 25% excise tax, reported on Form 5329, reducible to 10% if you correct the failure promptly. That applies to missed annual RMDs in years 1 through 9 and to blowing the final deadline. The IRS is not lenient about deadlines you did not know existed, which is the entire argument for identifying your clock in the first month, not the first year.
Within 30 days of learning you are a beneficiary, write down the owner's date of death, whether they had reached their required beginning date, and exactly who the named beneficiary is. Those three facts determine everything, and nailing them down is my whole recommendation. Everything else, the bracket planning, the Roth conversions, the QCD strategies, is optimization. The clock is the constraint, and the constraint is set the day you find out.
Frequently asked questions
What is the 5-year rule for an inherited IRA?
The entire balance must be withdrawn by December 31 of the fifth year after the owner's death. The SECURE Act largely replaced it with the 10-year rule for post-2019 deaths, but it still applies to non-individual beneficiaries (estates, charities, non-qualifying trusts) when a traditional IRA owner died before their required beginning date, and to pre-2020 deaths.
What is the 10-year rule for an inherited IRA?
For deaths after December 31, 2019, most non-spouse, non-EDB beneficiaries must empty the account by December 31 of the tenth year after death. If the owner died on or after their required beginning date, annual RMDs are also required in years 1 through 9.
When does the 5-year rule still apply instead of the 10-year rule?
When the beneficiary is not an individual and the traditional IRA owner died before their required beginning date, and for pre-2020 deaths where the beneficiary chose the 5-year deferral. Executors of estates are the most commonly surprised group.
Does the 5-year rule apply to an inherited Roth IRA?
A non-individual beneficiary inheriting a Roth IRA is generally subject to the 5-year distribution rule. Separately, the Roth 5-year holding period for tax-free earnings uses the original owner's start date, not the inheritance date. Two different rules sharing a name.
What happens if you miss the 5-year or 10-year deadline?
A 25% excise tax on the amount that should have been withdrawn, reported on Form 5329, reducible to 10% if corrected promptly. The same tax applies to missed annual RMDs in years 1 through 9.
Related: Annual RMDs During the 10-Year Rule: Years 1-9 Explained · What Happens If You Don't Empty an Inherited IRA in 10 Years? The Penalty · The Inherited Roth IRA and the 10-Year Rule · Eligible Designated Beneficiary: Who Still Gets the Stretch?
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