Inherited IRA withdrawal rules

With an Inherited IRA, you may either need to take annual distributions no matter what age you are when you open the account or may be required to fully distribute the assets in the account within a specified number of years. These rules don't apply if you've simply transferred another IRA to your own IRA but are specific to Inherited IRAs.

This guidance is also for situations where the IRA account holder died after 2019, and therefore, the rules under the SECURE Act apply. You can also review additional information in our Inherited IRA Brochure (SECURE Act compliant).

If the account holder died before 2020, and therefore is not subject to the changes in the SECURE Act, you can learn about distributions options in our Inherited IRA Brochure that covers scenarios prior to the SECURE Act, here.

Please also note that the below options are for individuals that are specifically named as the beneficiary on the decedent’s IRA account. If you are named as the beneficiary in an estate, you should consult your estate or financial planner.

Traditional IRA: Spouse inherits

If you inherit a Traditional, Rollover, SEP, or SIMPLE IRA from a spouse, you have several options, depending on whether your spouse was under or over age 72. Most commonly, those who inherit an IRA from a spouse transfer the funds to their own IRA.

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If your spouse (the account holder) was under 72, these are your choices:

Option #1: Spousal transfer (treat as your own)

Account type

You transfer the assets into your own existing or new IRA.

Money is available

At any time, but a penalty will apply to withdrawals made before you reach age 59½.

Other considerations

• Only available if the you are the sole beneficiary.
• IRA assets can continue growing tax-deferred.
• If you are under 59½ you'll be subject to the same distribution rules as if the IRA had been yours originally, so you cannot take distributions without paying the 10% early withdrawal penalty—unless you meet one of the IRS penalty exceptions.
• You may designate your own IRA beneficiary.

Option #2: Open an Inherited IRA: Life expectancy method

Account type

You transfer the assets into an Inherited IRA held in your name.

Money is available

Required Minimum Distributions (RMDs) are mandatory, and you have the option to postpone distributions until the later of:

• When the decedent would have attained age 72, or
• 12/31 of the year following the year of death.

Distributions must begin no later than 12/31 of the year the account holder would have reached 72.

Other considerations

• Your annual distributions are spread over your single life expectancy, which is determined by your age in the calendar year following the year of death and reevaluated each year.
• If multiple beneficiaries, separate accounts must be established by 12/31 of the year following the year of death; otherwise, distributions will be based on the oldest beneficiary.
• Required Minimum Distributions (RMDs) are mandatory and you are taxed on each distribution.
• You will not incur the 10% early withdrawal penalty.
• Undistributed assets can continue growing tax-deferred.
• You may designate your own IRA beneficiary.

Option #3: Open an Inherited IRA: 10 year method

Account type

You transfer the assets into an Inherited IRA held in your name.

Money is available

At any time up until 12/31 of the tenth year after the year in which the account holder died, at which point all assets need to be fully distributed.

Other considerations

• You are taxed on each distribution.
• You will not incur the 10% early withdrawal penalty.
• Undistributed assets can continue growing tax-deferred for up to ten years.
• You may designate your own IRA beneficiary.

Option #4: Lump sum distribution

Account type

None. All assets in the Traditional IRA are distributed to you.

Money is available

All at once.

Other considerations

• You will pay income taxes on the distribution all at once.
• You will not incur the 10% early withdrawal penalty.
• You may move to a higher tax bracket depending on the amount of the distribution and your current income level.

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If your spouse (the account holder) was over 72, these are your choices:

Option #1: Spousal transfer (treat as your own)

Account types

You transfer the assets into your own existing or new IRA.

Money is available

At any time, but a penalty will apply to withdrawals made before you reach age 59½.

Other considerations

• Only available if the you are the sole beneficiary.
• IRA assets can continue growing tax-deferred.
• You must take an RMD for the year of death ( if the account holder did not already take it).
• If you are under 59½ you'll be subject to the same distribution rules as if the IRA had been yours originally, so you cannot take distributions other than RMD for the year of the death without paying the 10% early withdrawal penalty.
• You may designate your own IRA beneficiary.

Option #2: Open an Inherited IRA: Life expectancy method

Account type

You transfer the assets into an Inherited IRA held in your name.

Money is available

You must begin taking an annual RMD over your life expectancy beginning no later than 12/31 of the year following the original account holder's death.

Note: If the original account holder did not take an RMD in the year of death, an RMD must be taken from the account by 12/31 of the year the original account holder died.