Inherited Retirement Accounts: Beneficiaries, the 10-Year Rule, and Inherited IRAs

When you inherit a 401(k) or IRA, two things decide what happens next: who was named as beneficiary, and what kind of account it is. The beneficiary designation controls who gets the money, even over a will. After that, the SECURE Act’s 10-year rule, your relationship to the person who died, and whether the account is traditional or Roth all shape how and when you must take the money out, and how much tax you owe.

When my mother died, sorting out her accounts was the most stressful financial thing I have ever done, and the rules had changed since I had last looked. I am glad I did not try to guess. This guide, checked by a CERTIFIED FINANCIAL PLANNER, walks through the essentials, but inheritance is one area where I would not rely on a single article. For the wider context of how these accounts work, see retirement planning.

Beneficiaries control who inherits, even over a will

The beneficiary you name on a retirement account decides who inherits it, and that designation overrides your will. This is the single most important fact in the whole topic, and the one most people get wrong by neglect.

When you open a 401(k) or IRA, you name a beneficiary. When you die, that named person inherits the account directly, regardless of what your will says. The classic horror story is an old 401(k) that still names an ex-spouse years after a divorce; the ex generally inherits it, will or no will.

So the practical action is simple: review your beneficiaries regularly, and update them after any major life event, marriage, divorce, a birth, or a death. Naming a backup (contingent) beneficiary is wise too. It takes five minutes and can prevent a genuine family disaster. We treat this as a core part of reviewing your retirement plan.

The SECURE Act 10-year rule

Under the SECURE Act, most non-spouse heirs must empty an inherited 401(k) or IRA within 10 years of the original owner’s death. This replaced the old “stretch IRA,” which let heirs spread withdrawals over their own lifetime and stretch the tax bill across decades.

The key points:

• Who it applies to: most non-spouse beneficiaries, such as adult children, who inherit on or after the rule took effect.
• The deadline: the account must be fully withdrawn by the end of the 10th year after the death.
• Possible annual distributions: depending on whether the original owner had already started required minimum distributions, some heirs must also take a minimum amount in each of those 10 years.
• Exceptions: certain “eligible designated beneficiaries,” including a surviving spouse, a minor child of the owner, and disabled or chronically ill heirs, are treated more generously.

The 10-year window matters for tax planning, especially with a traditional account, because cramming withdrawals into a few years can push you into higher tax brackets. Spreading them sensibly across the decade is often smarter than waiting until year 10. This area has shifted several times in recent years, so always check the current IRS guidance.

A surviving spouse has more options

A surviving spouse can usually treat an inherited IRA as their own, an option no other heir gets. This flexibility is the main reason spousal inheritance is handled separately.

A spouse can often choose to:

• Treat it as their own by rolling it into their own IRA, then follow the normal rules: no required distributions until their own required age (currently 73), and withdrawals on their own timeline.
• Remain a beneficiary of the inherited account, which can make sense if the spouse is younger than 59½ and may need penalty-free access sooner.

Which path is better depends on the surviving spouse’s age, income needs, and tax picture. Because the choice can be irreversible and the dollar amounts are often large, this is a textbook case for getting advice before acting. See accessing your retirement savings for how the under-59½ penalty rules work.

Traditional vs Roth: the tax difference

Inheriting a traditional account means your withdrawals are taxed as ordinary income, while an inherited Roth account generally comes out tax-free. The split mirrors the core traditional vs Roth logic that runs through all retirement accounts.

• Inherited traditional 401(k) or IRA: the original owner never paid tax on this money, so you pay ordinary income tax as you withdraw it. Combined with the 10-year rule, the timing of those withdrawals can have a big effect on your tax bill.
• Inherited Roth account: the tax was already paid, so qualified withdrawals are generally tax-free, subject to the holding-period rules. You still usually have to empty it within 10 years, but you can let it grow tax-free for most of that window and withdraw near the end.

That difference can change your whole strategy. With an inherited Roth, leaving the money invested as long as the rules allow often makes sense; with an inherited traditional account, you have to weigh tax-bracket management against the deadline. For the broader picture, see taxes in retirement.

Required distributions and getting it right

Beyond the 10-year deadline, some inherited accounts carry annual required distributions, and missing one can trigger a penalty. Whether you owe an annual minimum within the 10 years depends largely on whether the person who died had already begun taking RMDs.

This is genuinely one of the most technical corners of retirement rules, and it has been clarified and changed repeatedly. The remember-this version: do not assume you can simply wait until year 10, and do not assume you can leave the account untouched. Check the current IRS required-minimum-distribution guidance, and confirm your specific situation, because the penalty for getting it wrong is real.

This is general information, not tax or financial advice, and these rules change. Given the tax stakes and the irreversibility of some choices, a tax professional and a fiduciary financial advisor are well worth it when you inherit a retirement account. See choosing a financial advisor, and check the free official guidance at IRS.gov. Inheritances also attract scammers and high-pressure sales, so stay cautious; see avoiding retirement scams.