If you inherited a traditional IRA from a parent, sibling, or friend in the last few years, there's a good chance you've been treating it like a slow-burn account: leave it alone, let it grow, and clean it out sometime before the 10-year deadline. For 2021 through 2024, that instinct carried no penalty — the IRS explicitly waived the fine while it sorted out its own rules. Enforcement began in 2025, and 2026 is the first full year the tax applies with no more grace. The catch isn't the well-known 10-year emptying deadline. It's a second, quieter requirement buried inside it: for many heirs, an annual withdrawal is now mandatory in years one through nine, and missing one triggers a 25% excise tax. Here's how to tell whether the rule lands on you, and what to do before the year closes.
The Two Rules Hiding Inside One Deadline
When the SECURE Act passed in 2019, it eliminated the 'stretch IRA' — the old strategy that let a non-spouse heir spread inherited-IRA withdrawals (and the taxes on them) across their own lifetime. In its place came the 10-year rule: most non-spouse beneficiaries must fully drain an inherited IRA by December 31 of the tenth year after the original owner's death. Inherit in 2022, and the account has to hit zero by December 31, 2032.
For years, most people read that as a single instruction: empty it by year 10, in whatever pattern you like. But the IRS's final regulations, published in July 2024, confirmed a second layer. If the person you inherited from had already reached their Required Beginning Date — the age at which they had to start their own required minimum distributions, now 73 — then you must also take a required withdrawal every year, in years one through nine. You cannot skip a year and back-load it all into year 10.
That distinction is the whole ballgame in 2026. The 10-year clock is easy to remember. The annual-RMD-inside-the-10-years requirement is the one that quietly racks up penalties, because nothing on your statement flags it.
The Two-Part Test: Does the Annual Withdrawal Apply to You?
Whether you owe an annual withdrawal comes down to two questions. First: are you a 'non-eligible designated beneficiary' — essentially, an adult child or other non-spouse heir who doesn't fall into a protected category? Second: had the original owner already started their own RMDs (i.e., died on or after their Required Beginning Date)?
If the answer to both is yes, you're in the annual-withdrawal camp: a required amount in years one through nine, then the balance cleared by year 10. If the original owner died before their Required Beginning Date, there's no annual requirement — you still have to empty the account by year 10, but you can choose when to pull the money along the way. Same 10-year deadline, very different flexibility.
The Heirs the Rule Skips Entirely
- Surviving spouses — who have their own, far more flexible set of options, including treating the IRA as their own.
- Minor children of the original owner — though the 10-year clock starts once they reach the age of majority.
- Beneficiaries who are disabled or chronically ill under the tax code's definitions.
- Any beneficiary who is not more than 10 years younger than the original owner — for example, a close-in-age sibling or partner.
- These 'eligible designated beneficiaries' are exempt from the strict 10-year drain and its annual-RMD trap; everyone else generally is not.
What the 25% Penalty Looks Like in Real Dollars
The annual withdrawal is calculated the same way as any RMD: take the account's balance as of the prior December 31 and divide it by a life-expectancy factor from the IRS Single Life Table in Publication 590-B. The factor is tied to your age, and unlike your own future RMDs, it isn't recalculated fresh each year — it steps down by one annually.
Say you're 55 and inherited a $500,000 traditional IRA from a parent who was already taking distributions. The Single Life Table factor at 55 is about 31.6. That makes your year-one required withdrawal roughly $15,823. Forget it, and the excise tax is 25% of that missed amount — about $3,956 — on top of eventually owing ordinary income tax on the money anyway. Miss it three years running and the penalties alone can approach five figures, all for a withdrawal you were going to be taxed on regardless.
The good news: this is one of the more forgivable penalties in the tax code. If you catch a missed withdrawal and take a corrective distribution within a two-year window — filing Form 5329 to document it — the IRS cuts the excise tax from 25% down to 10%. On that same missed $15,823, that's the difference between roughly $3,956 and $1,582.
A Smarter Drawdown Than 'Wait Until Year 10'
Even if you're only required to take the minimum, mechanically taking the smallest legal amount for nine years and then a giant final withdrawal is often the worst tax outcome. That balloon payment can rocket you into a higher bracket, inflate the taxable portion of your Social Security later, or push you past an IRMAA threshold that raises your Medicare premiums. Spreading withdrawals evenly across the 10 years — or front-loading them in a low-income year like an early-retirement gap or a sabbatical — usually beats the minimum-then-balloon approach.
Your Before-December-31 Checklist
- Confirm your category: are you a non-spouse, non-exempt heir? If so, the strict 10-year rule applies.
- Find out whether the original owner had started their own RMDs before death — this single fact decides whether you owe annual withdrawals.
- Pull your inherited account's balance as of last December 31 and locate your Single Life Table factor in IRS Publication 590-B.
- Take at least the required amount before the year closes; don't let a calendar deadline hand the IRS 25% of it.
- Model whether taking more than the minimum this year lowers your lifetime tax bill by keeping any single year out of a higher bracket.
- If you realize you missed a prior year, act now: a corrective distribution plus Form 5329 within two years cuts the penalty to 10%.
The inherited IRA rules have spent five years in a fog of delayed regulations and waived penalties, and that fog is exactly why so many heirs assume the only deadline that matters is year 10. In 2026 that assumption gets expensive. If you inherited a traditional IRA from someone who was already taking distributions, you likely owe a withdrawal this year — and the 25% excise tax on skipping it dwarfs any tax you'd save by waiting. Before you decide how much to pull, run your specific numbers: our RMD Calculator will size your required withdrawal from your balance and age, and let you test whether taking more than the minimum this year keeps your lifetime tax bill lower. A ten-minute calculation now is a lot cheaper than a quarter of your withdrawal later.
